A message from the North Carolina Association of CPAs (NCACPA) and the Maryland Association of CPAs (MACPA):
On August 31, 2017 when AICPA released its ‘white paper,’ “Evolving Peer Review Administration to Enhance Audit Quality,” we knew significant changes to our peer review administrations were on the horizon. Since that time, we have each has taken great care to adhere to the various benchmarks and new procedures, all while efficiently using available resources.
The requirement for all administering entities to add a CPA on Staff as required by the AICPA caused us to reassess our administration through a different lens. The only alternatives remaining were:
- Including a CPA on staff, which would significantly increase costs to enrolled firms;
- Transferring our peer review administration to another administering entity (AE); or
- Collaborating with other state CPA societies administering peer review to find alternative solutions.
Our member surveys indicated a strong desire for NCACPA and MACPA to remain involved in administering the program, and our respective Boards of Accountancy also expressed its desire for us to remain active in peer review administration.
Through discussions with other state societies, we determined our best option was to collaborate on an innovative, sustainable solution that shares resources and creates economies of scale by spreading the increase in costs, all while maintaining Association presence in peer review administration. Partnering with another state society provides not only the best alternative for North Carolina and Maryland firms enrolled in the peer review program, but also would also be the first jointly created entity created amongst administering entities since the New England Peer Review Program was created in the 1980s.
During June 2020, both the North Carolina Association of CPAs Board of Directors and the Maryland Association of CPAs Board of Directors have approved joint peer review administration through a newly created entity, Coastal Peer Review, Inc. Coastal, incorporated in North Carolina on July 30, 2020, is a 501(c)(6) organization that began operating on January 1, 2021.
The peer review program is a member service and not a money-making program. In fact, over the past few years, we have struggled to break-even as the peer review process has become more complex and time intensive. The annual fee billed in January is comparable to those charged by many of the other surrounding state administering entities. This collaborative arrangement will allow NCACPA and MACPA to honor the wishes of our members and remain directly involved in the peer review process, and the annual fee allows Coastal Peer Review, Inc. to meet its operating costs. Had we not worked on this collaboration and bore the costs as individual states fully complying with the new AICPA requirements, the costs would have been higher, in fact, much higher. These are the reasons why – together with our Boards of Directors – we made this choice to collaborate.
The current staff administrators from North Carolina and Maryland remain in place and the new CPA on Staff has joined the team. While the changes we have made to our peer review infrastructure have been innovative and intentional, we are also making every effort to keep the overall peer review process as similar and familiar as possible. There is no change in the process of selecting a peer reviewer. Firms may still select from a list of qualified reviewers to perform their peer review.
Peer review continues to be the foundation of maintaining the quality and independence of the audit, and in protecting the public interest of this essential service. We appreciate your understanding and cooperation.