A system review is a study and appraisal by an independent evaluator(s), known as a peer reviewer, of a CPA firm's system of quality control to perform accounting and auditing (A&A) work.
The quality control system represents the policies and procedures that the CPA firm has designed, and is expected to follow, when performing its work.
As the peer reviewer, our objective is to determine whether the quality control system is designed to ensure compliance with professional standards and whether the firm is following its system appropriately.
Firms that perform engagements under the Statements on Auditing Standards (SASs), Government Auditing Standards (Yellow Book) or examinations of prospective financial statements under the Statements of Standards for Attestation Engagements (SSAEs) are subject to system reviews.
The scope of this type of peer review does not encompass other segments of a CPA practice, such as tax services or management advisory services, except to the extent that they are associated with financial statements, such as reviews of tax provisions and accruals contained in financial statements.
This type of review is for firms that are not required to have a system review.
Unlike system reviews, where a firm's system for quality control policies and procedures are evaluated, an engagement review evaluates the firm's financial statements and documentation regarding conformance to AICPA professional standards.
As the reviewer, we do not express an opinion on the firm's compliance with its own quality control policies and procedures or compliance with AICPA quality control standards.
An engagement review provides us with a reasonable basis for expressing limited assurance that:
- The financial statements or information and the related accountant's report on the accounting, review and attestation engagements the firm submits for review conform to professional standards
- The reviewed firm's documentation conforms with the requirements of professional standards
Firms that only perform compilations and reviews under Statements on Standards for Accounting and Review Services (SSARS) and/or services under the SSAEs not included in system reviews have engagement reviews.
Firms required to have an engagement review may also elect to have a system review.