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State Board Report

June 2014

When Ian Dingwall, Chief Accountant-Employee Benefits Security Administration of the US Department of Labor (DOL), addressed the Executive Directors Conference in March, he underscored the poor quality of some audits of employee benefit plans (EBP) discovered by his inspectors (see March 2014 SBR). The Executive Directors responded by asking for more information from the DOL about CPAs who are performing EBP audits. NASBA worked with the DOL to obtain a complete list of the close to 5,000 EBP audit firms, which NASBA then parsed by jurisdiction and is sending to each Board the first week of June. EBP audits are among the “must select” engagements that the peer reviewer needs to include in the sample of work reviewed; consequently, checking against peer review reports should identify which firms had appropriately complied with peer review requirements and been successfully reviewed.

NASBA Vice President Dan Dustin wrote to the Boards’ Chairs and Executive Directors: “Upon receipt of the list, State Boards may choose to: 1. Verify the registration of the EBP auditor in its state or jurisdiction, if required, and 2. use the AICPA’s Facilitated State Board Access (FSBA) database to verify that the public accounting firms in its jurisdiction had the appropriate peer review report issued, including the required reference to EBP audits. NOTE: NASBA is available to assist any State Board that requests help in verifying the registration and peer review report information related to this issue.”

On May 28 the AICPA’s Peer Review Board (PRB) held an open conference call, in which State Board representatives participated, to consider revised guidance to its peer review administering entities related to the recall of peer review reports when must-select engagements, such as EBP audits, are not included in a firm’s peer review. The guidance, which was approved, clarifies for the administering entities and the State CPA Societies the PRB’s instruction to communicate with Boards of Accountancy regarding recalled peer review reports.

The revised guidance states: “The administering entity must recall its acceptance letter when notified by staff that the peer review report is not correct in all material respects. The peer review information and peer review documents must be removed from view on Facilitated State Board Access (FSBA), and the administering entity must notify the applicable State Board(s) of Accountancy of information allowed by the guidance.” The administering entity is also to proactively notify the same State Accountancy Boards when the replacement review is accepted.

Based on the AICPA’s research on the EBP auditors’ peer review compliance conducted through May 13, the Peer Review Board reported that 119 peer review reports had been recalled requiring replacement reviews, another 89 firms were going to require additional replacement reviews without the recall of their original reviews, and 9 firms were referred to AICPA’s Professional Ethics because a peer review had not been performed. The AICPA has not yet completed its matching of the DOL list of auditors with reported peer review compliance.

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