Academic journal article Journal of Accountancy

AICPA Looks at Ways to Lower Review Costs

Academic journal article Journal of Accountancy

AICPA Looks at Ways to Lower Review Costs

Article excerpt

Even as the quality review program completes its first three-year cycle, with firms reviewed in the 1989 pilot year receiving their second reviews in 1992, the AICPA continues to focus its attention on member concerns--particularly the cost of quality reviews.

During the past three years, more than 13,000 quality reviews were completed, including 3,000 off-site reviews of firms that perform compilations and reviews but no audits. Of the reports issued to firms reviewed on site, 84% were unqualified and 14% were qualified; only 2% were adverse.

News well received

Eighty percent of the unqualified reports were accompanied by letters commenting on deficiencies in firms' practices and offering recommendations for improvement. These recommendations generally were well received by the reviewed firms, according to Elma Satterfield, a senior technical manager of the quality review division. Typical comments from practitioners read, in part, "I had doubts about the need for quality review, but it was not disruptive and the team captain helped us improve our system," and "Our firm was very impressed with the quality review program. We believe it will be a major force to improve the quality of services." A dart on solving a problem Quality review costs remain a problem for some small firms. In early 1992 the average total cost, including administrative fees and reviewers' expenses, of a quality review for a sole practitioner with no professional staff was approximately $1,800. For firms with 2 to 5 professionals, it was about $2,600, and for firms with 6 to 10 professionals, $3,600.

The AICPA is attempting to find ways to lower these costs. It already has taken one major step in this direction. In August of this year, the quality review executive committee amended interpretation no. 1 of the Standards for Performing and Reporting on Quality Reviews to allow sole practitioners with up to 4 professional staff (5 professionals in all) to have on-site reviews conducted at locations other than the reviewed firm's office. The amendment also eliminated the requirement for a personal meeting between the reviewer and sole practitioner.

In effect, the amendment means sole practitioners can now have their on-site reviews conducted entirely by mail and telephone, which can significantly reduce quality review ,costs.

What practitioners can do

Practitioners can also take steps to reduce their own quality review costs. …

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