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Should peer review results be made public?

At its spring 2004 meeting the AICPA's Governing Council approved a resolution supporting increased transparency in the peer review process. It also authorized a member awareness program to inform members about the issues surrounding peer review transparency and to assess how they feel about possible changes to make peer review results more widely available:

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1) Creating a public file that would be open to inspection by the general public.

2) Creating a state regulatory file open to inspection only by state boards of accountancy.

Greater Transparency as a Badge of Honor

Today, almost 35,000 U.S. accounting firms rely on peer review to demonstrate that their accounting and auditing practices meet the highest standards. About 6,400 firms voluntarily place their peer review results in a public file accessible to anyone with Internet access. About 15,000 additional firms provide peer review results to regulatory bodies or to clients as part of regulatory requirements such as GAO Yellow Book. In addition, many firms communicate their peer review results in their marketing literature, and some suggest that prospective clients request peer review reports from all firms they are considering.

Confidentiality or Transparency

Probably the most common argument against making all peer review results public is that any such change would rescind a commitment the AICPA made to its members in 1988, nearly 20 years ago. When members agreed to mandatory peer review, it was designed as an educational and remedial program that would strengthen quality control practices in CPA firms. Its role was corrective, not punitive, and confidentiality was a critical component of passage.

Opponents of greater transparency argue that asking firms to make their peer review results public would violate these promises. Others, however, counter that in today's environment of heightened accountability, this kind of confidentiality is becoming increasingly difficult to support. This view holds that the primary users of peer review has expanded from AICPA members alone to now include regulators, clients, and credit grantors. These constituents expect greater transparency, but have no way of evaluating peer review results as long as they remain confidential.

Another concern of some CPAs is that by making peer review results public the AICPA would be taking on a responsibility that should be left to regulators. Some CPAs are also worried that making peer review results public will make reviewers less candid, rendering the recommendations less helpful to the reviewed firm.

Members of the AICPA Center for Public Company Audit Firms (CPCAF) and the Alliance for CPA firms (PCPS), who already make their peer review results public, counter that full transparency actually improves the quality of peer review by ensuring that reviewers write thoughtful, helpful recommendations. They also believe that the quality of their firms' work improves when people know a reviewer is going to come in every three years and that the information is going to be made public. Many members want the profession to increase transparency before the government steps in and does it for them.

Another concern that has been expressed is whether this move would require structural changes, with a resulting increase in peer review fees. However, an apparatus already exists to post peer review results for those firms that have agreed to have PCPS and CPCAF public files on the AICPA Web site. Therefore broader public disclosure should not appreciably add to the cost of peer review.

The AICPA Needs to Hear from You

Because any change requiring greater transparency of peer review results could only occur after a membership referendum, members in Ohio and throughout the United States need to begin a dialogue on the impact of any such change.

For more information:

Go to the AICPA Web site at at http://www.aicpa.org/transparency/index.htm.

Send comments and views to peerreviewtransparency@aicpa.org.
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Copyright 2005 Gale, Cengage Learning. All rights reserved.

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Publication:Catalyst (Dublin, Ohio)
Date:Mar 1, 2005
Words:634
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