Peer Review: Proposed Regulations And Current Compliance

Recent actions by the AICPA and the Securities & Exchange Commission (SEC) have again focused attention on the question of audit quality and the role of the peer review process. Both the SEC and the AICPA feel that peer reviews can help to ensure a high level of audit quality. Questions about the potential impact of mandatory peer review prompted a survey based on the auditors of 9,988 public companies. These auditing firms were segregated into 4 groups, based on the number of audit reports issued. The groups then were compared to members of 2 sections of the AICPA's Division for Firms, which requires its members to have triennial peer reviews. In the least active group (firms issuing 10 or less reports), 77% were not members of either section. Thus, it appears likely that mandatory peer review would have the greatest impact on the least active firms, and it is possible that these firms would cease auditing public clients rather than comply with mandatory review.