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Wanted: a few good reviewers.

R.K. McCabe, CPA, DBA, professor of accounting, California State University--Fullerton, describes how CPAs can provide a valuable service to the profession by performing on-site reviews.

Over 10,000 CPA firms will undergo quality or per peer review this year through the American Institute of CPAs quality review program and the division for CPA firms. While the current number of qualified reviewers is about 6,900, more are needed. This is a golden opportunity for experienced professionals to hone their own accounting and auditing skills and expand their practices by becoming AICPA reviewers.


Perhaps the most important reason to become a reviewer is to protect the profession. Challengers to the accounting profession's self-regulatory status probably will continue. If the profession can show that peer and quality reviews protect the public interest, then those interested in increasing government control can be deterred.

There are number of other benefits for CPAs and their firms when they perform reviews.

Financial rewards. Review captains working for the AICPA bill between $75 and $95 an hour for on-site reviews, depending on the size of the reviewed firm. Hourly rates for team members range from $65 to $85 (for partners) and from $55 to $75 an hour (for managers). Firms that perform reviews independently may charge less, the same or more.

These rates may seem low for top professionals, but peer review can be off-season work and every minute is billable. There are no other pluses: out-of-pocket expenses are reimbursed; the fees are 100% collectible when the work is done for the AICPA; and a typical engagement often involves 10- to 12-hour days, so the day's billing summary is satisfactory. These facts make the fee structure seem more reasonable.

More important, peer and quality reviews are emerging as significant revenue sources. With 10,000 or more reviews scheduled every year, this is going to be an important practice area for some firms.

Improved quality control. Firms that perform peer and quality reviews perceive greater improvement in their own quality control systems than firms that don't do reviews. Most reviewers believe the experience provides the impetus to maintain the highest degree of compliance with professional pronouncements and improves their ability to detect material misrepresentation. This may be because firms with which reviewers are associated use checklists more consistently or because reviewers learn on the job. Reviewers sometimes evaluate inadequate quality control systems. They see what happens when firms fail to comply with professional pronouncements and must issue revised financial statements. They know what checklists or work programs would have helped prevent such mistakes and take these insights back to their own firms.

Increased efficiency. Reviewers usually offer observations about staffing, personnel policies and marketing strategies. Exchanges of ideas in these areas improve each reviewer's firm as well. For instance, a client acceptance procedure my firm used came directly from a firm I reviewed, as did an idea on conducting tax seminars to help us expand our tax practice.



On-site reviewers for the AICPA quality review program and the AICPA division for CPA firms must be active at the manager level or above in the accounting and auditing function of a CPA firm. The firm must be a member of the AICPA quality review program or the division for CPA firms. The reviewer must be a licensed CPA, be an AICPA member, have current knowledge of professional standards and have at least five years' experience in accounting and auditing.

Team captains on quality reviews must be proprietors, partners or shareholders of enrolled firms and must have completed an approved reviewer training course after December 31, 1985. Effective January 1, 1992, the firm must have received an unqualified opinion on its review. However, if the team captain's firm has had a review before that date, the opinion must be unqualified. The requirements for performing reviews for the division for CPA firms are essentially the same, but membership in the division is necessary and the team captain's firm must have had a peer review and received an unqualified opinion before he or she can serve in that capacity.



Reviewers should offer meticulous attention to detail, experience, good communication skills and excellent interpersonal skills. In addition, a top reviewer should care about the accounting profession.

Attention to detail. A meticulous review improves a reviewed firm's quality control system and helps boost its confidence in its practices and procedures because some areas have been fine-tuned and the system in general proven sound. Greater confidence leads to increased reliance on the system, which leads to more efficiency. For example, a firm with properly designed work programs and checklists may be able to lower its partner review time substantially.

A successful review also bolsters team spirit. Each firm member feels better about the quality of his or her own work and that of fellow employees. Research shows this often leads to greater cohesiveness among firm members, which in turn frequently enhances productivity and thus increases profits.

Experience. Reviewers who have been practicing for some time bring to the review a high level of knowledge and judgment. The reviewer requirements demand a minimum of five years' experience in accounting and auditing. Reviewers unquestionably need considerably more experience.

While experience in accounting and auditing is essential, firm management knowledge also is important. Mature practitioners bring to the review their experience in trying numerous ways to improve firm efficiency. Along the way, they've probably found a few that work.

Communication. Most reviews probably will uncover some quality control weaknesses. A reviewer with good communication skills can identify a problem and spell out a solution consistent with firm practices.

Reviewers with good communication skills demonstrate they've heard what someone says before giving their own opinion. For example, sole proprietors often maintain they don't need checklists since they're the only people doing the work. A good listener will acknowledge this argument has some merits but point out that people don't have perfect memories, which means checklists of various kinds are necessary for every size firm. Good communicators respect others and thus gain respect and confidence in return.

People skills. Peer and quality reviews resemble audits in many ways. Auditors and reviewers who are good with people find out more information faster than those who aren't.

For example, interviews are the best way to understand a firm's decision-making process on client acceptance and staff engagement assignments. Reviewers who establish rapport with support staff, junior accountants and partners get the information they need for an accurate assessment. Reviewers with less skill may never know what really goes on.

Strong people skills also enhance the reviewed firm's perceptions of review benefits. For example, a savvy reviewer may ask that all firm personnel attend the exit conference. That meeting emphasizes that the review's success depended on individual efforts. This helps affirm the importance of individual work and team effort. If the reviewer doesn't stress individual responsibility, then enhanced morale, a review benefit, won't be achieved.

Concern for the profession. The decision to become a reviewer is often influenced by concern for the profession. When I've asked reviewers why they do reviews, many say they feel they are giving back something to their profession.

Another frequent reply is perhaps a little more selfish. Some believe their own success depends on the profession's success. An accounting or auditing failure is embarrassing to each of us regardless of our lack of involvement in the engagement. While auditors can't prevent all substandard performance, peer and quality reviews help limit the number of accounting and audit failures and enhance the quality of what we do.



CPAs who meet reviewer requirements can start out by doing a few reviews and then assessing their success and satisfaction with this service. For those who would like to become more active, there are a number of ways to do so.

Review teams may be formed by the AICPA, an authorized state CPA society or an association of CPA firms. Those formed by the AICPA or a state society are selected by the AICPA computer system, which matches firm and reviewer specialties. This is a good resource, but it alone won't help establish a peer review practice.

For most reviewers, firm-on-firm reviews are a good opportunity. As always, the key to success is client service, because it leads to referrals and higher profits.


The marketing process should include discussions with CPAs whose firms have been reviewed recently. New reviewers should ask about costs and benefits and whether and why firm members would recommend their reviewers. Information about review benefits will provide insight into client satisfaction and how services should be refined. Questions about costs help develop realistic projections.

Many firms want a fixed-fee arrangement for their reviews. In all such arrangements, the inherent risks are apparent. The AICPA does not enter into fixed-fee arrangements. It does, however, have a general guideline that field work should take about 1% to 2% of the reviewed firm's accounting and auditing hours. Additional time is allowed for planning and completion. While the number of firm accounting hours is important, other variables also affect the time needed for a review. Because a representative sample of the firm's accounting and auditing practice must be selected, other variables have to be considered. These variables include selecting individual partners' work, firm locations, types of engagements and engagements requiring specialized knowledge.

After completion of a first review engagement, the reviewer should get feedback about the benefits and costs of the review. Reviewers also can ask if firm members believe their suggestions will increase efficiency and what will improve the review process. The answers will help CPAs become better reviewers.

Resources. Some firms insist the success of their review practices depends on nationwide mailings of professionally prepared brochures. Other firms maintain prosperous practices based on referrals alone. Once a firm has some experience doing reviews, a good marketing middle ground may be offering seminars in communities outside a firm's service area. (Competitors in a firm's area obviously will be unlikely to choose it as a reviewer.)

Size is also an issue. Usually, similar firms attract each other in the belief that commonalities in practice methods, client types and resource amounts will enhance the review. As a result, seminar participants should receive a complete firm profile that includes reviewer specialties.

Areas to emphasize. Seminars and brochures should focus on the positive results of a review and what the process is all about. Practitioners should explain the elements of a quality control system, describe how engagements are selected and provide examples of what's covered on engagement reviews. They also should talk about common problem areas, such as lack of documentation and inadequate disclosures. In seminars, it's also a good idea to relate how efficiency at the speaker's firm improved after its initial review. Finally, those committed to making this an important practice area might offer to do a consulting review at a moderate cost. The AICPA charges $500 for such a review.


Mandatory quality review has created a unique opportunity to develop a potentially profitable and stable practice area. Those who succeed will have what it takes, care about the profession and have the belief and commitment to make it work.
COPYRIGHT 1991 American Institute of CPA's
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Article Details
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Author:McCabe, R.K.
Publication:Journal of Accountancy
Date:Aug 1, 1991
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