The reviewer will send an engagement letter to the firm prior to the commencement of the peer review. He/she will select the types of engagements based on the type of review.
System review selections
The AICPA Peer Review Program Standards require engagements selected for review to provide a reasonable cross section of the reviewed firm's accounting and auditing practice, with greater emphasis on those engagements in the practice with higher assessed levels of peer review risk.
Examples of the factors considered when assessing peer review risk at the engagement level include size, industry area, level of service, personnel (including turnover, use of merged-in personnel, or personnel not routinely assigned to accounting and auditing engagement), communications from regulatory, monitoring, or enforcement bodies; extent of non-audit services to audit clients, significant clients' fees to a practice office(s) and a partner(s) and initial engagements.
In addition, at least one of each type of engagement subject to Government Auditing Standards (GAS), Employment Retirement Income Security Act (ERISA), the Federal Deposit Insurance Corporation Improvement Act (FDICIA), audits of carrying broker dealers and examinations of service organizations must be selected for review.
Engagement review selections
The review captain or the administering entity ordinarily should select the types of engagements to be submitted for review in accordance with the following guidelines: One engagement should be selected from each of the following areas of service performed by the firm:
- Review of historical financial statements (performed under SSARS)
- Compilation of historical financial statements, with disclosures (performed under SSARS)
- Compilation of historical financial statements that omits substantially all disclosures (performed under SSARS)
- Engagements performed under the SSAEs other than examinations of prospective financial statements
- Preparation engagements in some situations
One engagement should be selected from each partner, or individual of the firm, if not a partner, responsible for the issuance of reports listed. Ordinarily, at least two engagements should be selected for review.
The preceding criteria are not mutually exclusive. One of every type of engagement that a partner, or individual if not a partner, responsible for the issuance of the reports listed above does not have to be reviewed as long as, for the firm taken as a whole, all types of engagements performed by the firm are covered.