Missouri Society of Certified Public Accountants Peer Review Annual Report on Oversight Date Issued December 12, 2014

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1 Missouri Society of Certified Public Accountants Annual Report on Oversight Date Issued December 12, 214 Administering Entity Oversight Process and Procedures Oversight of s and ers The Committee is required by AICPA guidelines to perform oversight on reviews of AICPA member firms and will do so as part of a regular process to assure the consistency and quality of the program. The RAB committees will identify reviews for oversight where a concern arises about the quality of a review or reviewer, where there is an irresolvable disagreement between the reviewer and the reviewed firm or for any reason deemed appropriate by the committee. The chair of the executive committee or individual RAB chair will approve all AICPA members reviews selected for oversight and any non AICPA members reviews as recommended by the RABs. Minimum Requirements Each year, at a minimum, the administering entity will conduct oversight on 2% of all AICPA members reviews performed in a twelve month period and within the 2% selected there must be at least 2 of each type of peer review (system and engagement reviews). Whenever possible, system reviews containing ERISA engagements, engagements under Government Auditing Standards or FDICIA engagements or audits of broker dealers, will be considered first for on-site oversight; otherwise, two engagement oversights of "must select" engagements will be performed to meet the minimum oversight requirement for the year. Oversight Process All oversight reviews will be performed by reviewers who qualify as system review team captains. Preference will be given to current Committee members, followed by former committee members. The MSCPA administrative staff will advise the reviewed firm and its original peer reviewer of the upcoming oversight indicating the peer reviewer performing the oversight. The team captain of the original peer review will inform the MSCPA staff of scheduling dates. MSCPA staff will then coordinate the oversight review with the team captain, the oversight reviewer and the reviewed firm. Depending on the nature and timing of oversight required, the oversight review will be performed either at the reviewed firm s offices or at the oversight reviewer s office. If the oversight is conducted after the review was completed, the original reviewer can, if desired, at his or her own expense, attend the oversight review as it is being performed. The oversight reviewer will receive information regarding specific concerns of the committee and a suggested time budget. Oversight reviewers should inform the MSCPA administrative staff if they will exceed the time budget prior to the overage occurring. Oversight reviews may result in a change of a previously issued report or FFCs based on the findings of the oversight reviewer. The reviewed firm or the original reviewer may appeal any of these changes through the normal process. Oversight reviewers will be compensated at the rate of $2 per hour and will be reimbursed for their travel time and costs and any out-of-pocket expenses by the MSCPA. If agreed upon by the reviewed firm, oversight reviewers will be assigned to firms located nearby to minimize travel time and costs.

2 Missouri Society of CPAs Page 2 Oversight reviews will be performed using the appropriate AICPA checklists. ers performing oversight will submit a memo to the committee detailing their findings within two weeks of the review. ers undergoing oversight will receive a copy of the memo and will have an opportunity to respond. In addition to possibly causing a change in the report or FFCs, the results of the oversight may also be used as documentation of problem reviewers and can be the basis for further action. Administrative Oversight Oversight will also be performed on the MSCPA to ensure that the MSCPA program is being administered in accordance with guidance as issued by the AICPA Board. A member of one of the MSCPA peer review committees will perform administrative oversight in years when the AICPA Board Oversight does not oversight the program. Annual Verification of ers Resume s To qualify as a reviewer, an individual must be an AICPA member and have at least five years of recent experience in the practice of public accounting in the accounting or auditing functions. The firm that the member is associated with should have received an unmodified report on either its system or engagement review. The reviewer should obtain at least 48 hours of continuing professional education in subjects related to accounting and auditing every three years, with a minimum of 8 in any one year. A reviewer of an engagement in a high-risk industry should possess not only current knowledge of professional standards but also current knowledge of the accounting practices specific to that industry. In addition, the reviewer of an engagement in a high-risk industry should have current practice experience in that industry. If a reviewer does not have such experience, the reviewer may be called upon to justify why he or she should be permitted to review engagements in that industry. MSCPA has the authority to decide whether a reviewer s or review team s experience is sufficient to perform a particular review. Ensuring that reviewers resumes are updated annually and are accurate is a critical element in determining if the reviewer or review team has the appropriate knowledge and experience to perform a specific peer review. In accordance with Oversight Enhancement No. 4, MSCPA must verify information within a sample of reviewers resumes on an annual basis. All reviewer resumes are verified over a three-year period. As part of our oversight procedures, the MSCPA will request information from all Missouri reviewers divided (33% each year) over a three-year period, to verify Missouri reviewers have the required experience to perform peer reviews. This request will include: The number of total CPE hours obtained by year in the current and preceding two years, and certificates, if necessary. The number of A&A CPE hours obtained by year in the current and preceding two years, and certificates, if necessary. The information submitted in connection with their firm s last peer review pertaining to types of engagements performed. Information as to engagements that they perform or supervise in their firm that qualify them as a reviewer in practice areas and industries checked on their resume form, We will request that they update their resume on the AICPA website before submitting the information, Verification of compliance with governmental CPE, if necessary.

3 Missouri Society of CPAs Page 3 Summary of s The Missouri Society of CPAs (MSCPA) serves as the administering entity for the AICPA in the State of Missouri, and also administers the Missouri Society of CPAs (which operates exactly the same as the AICPA ) for firms not enrolled in the AICPA. The Missouri State Board of Accountancy (MOSBA) requires all firms in the state who provide attest, review or compilation services as part of their public accounting process to be enrolled in a practice monitoring [aka peer review] program. The MOSBA has designated MSCPA as an authorized report acceptance body to approve peer review reports issued for firms enrolled in peer review programs administered by MSCPA. Number of Enrolled Firms by Number of Professionals* as of December 11, 214. MSCPA AICPA ^ Total s No A & A Sole Practitioners Professionals Professionals Professionals Professionals Professionals 3 3 Totals * Professionals are considered all personnel who perform professional services, for which the firm is responsible, whether or not they are CPAs. ^At least one partner of the firm must be a member of the AICPA to enroll in the AICPA

4 Missouri Society of CPAs Page 4 Results of s Performed During the Year 214 Results by Type of and Report Issued AICPA ^ MSCPA System s: Pass 17 9 Pass with deficiency (ies) 3 16 Fail 2 4 Subtotal System Engagement s: Pass Pass with deficiency (ies) Fail 24 7 Subtotal Engagement Totals Note: The above data reflects peer review results as of December 11, 214. All 213 AICPA member reviews and non-member reviews have been presented and accepted by the RAB. ^At least one partner of the firm must be a member of the AICPA to enroll in the AICPA Type and Number of Reasons for Report Modifications The following lists the reasons, summarized by elements of quality control as defined by Statement on Quality Control Standards, for report modifications (when a Pass with Deficiency(ies) or Fail report is issued) and shows the number of firms that received these related reports from system reviews performed for 211. There may be more than one element per review causing report modifications. Reasons for Pass with Deficiencies and Fail Reports MSPCA AICPA ^ Leadership Responsibilities for Quality Control within the firm ( tone at the top ) 1 2 Acceptance & Continuance of Clients & Engagements 1 Human Resources 3 Engagement Performance 3 15 Monitoring 4 7 Totals 8 28 Note: The above data reflects peer review results as of December 11, 214. All 213 AICPA member reviews and non-member reviews have been presented and accepted by the RAB. ^At least one partner of the firm must be a member of the AICPA to enroll in the AICPA

5 Missouri Society of CPAs Page 5 Number of Engagements Not Performed and/or Reported on in Conformity with Applicable Professional Standards The following shows the total number of engagements reviewed and the number identified as not performed and/or reported on in conformity with applicable professional standards from peer reviews performed during 213. The Standards state that an engagement is ordinarily considered to fall into this category when deficiencies, individually or in aggregate, exist that are material to understanding the report or the financial statements accompanying the report, or represents omission of a critical accounting, auditing, or attestation procedure required by professional standards. Engagement Type MSCPA Number of Engagements AICPA ^ Number of Engagements ed Substandard ed Substandard Audits Single Audit Act (A-133) Audits Governmental All Others Audits ERISA Audits Other Non Carrying Broker Dealers 2 s Compilations with Disclosures Compilations without Disclosures Other SSAEs 6 SOC 1 3 Financial Forecast & Projection 2 3 Agreed Upon Procedures Totals Note: The above data reflects peer review results as of November 3, 214. All 214 AICPA member reviews and non-member reviews have been presented and accepted by the RAB. ^At least one partner of the firm must be a member of the AICPA to enroll in the AICPA

6 Missouri Society of CPAs Page 6 Summary of Required Follow-up Actions The Committee is authorized by the Standards to decide on the need for and nature of any additional follow-up actions required as a condition of acceptance of the firm s peer review. During the report acceptance process, the peer review committee evaluates the need for follow-up actions based on the nature, significance, pattern, and pervasiveness of engagement deficiencies. The peer review committee also considers the comments noted by the reviewer and the firm s response thereto. If the firm s response contains remedial actions which are comprehensive, genuine, and feasible, then the committee may decide to not recommend further follow-up actions. Follow-up actions are remedial and educational in nature and are imposed in an attempt to strengthen the performance of the firm. A review can have multiple follow-up actions. For 212, the following represents the type of follow-up actions required. Type of Follow-up Action MSCPA AICPA ^ Agree to take certain CPE Agree to hire consultant for pre-issuance reviews 4 9 Submit proof of CPE taken 2 4 Submit to TC revisit -- general 3 1 Submit to TC review of sub engagements w/ work papers 7 27 Submit proof of license 1 1 Submit monitoring report to the team captain 2 Accelerated 1 TC to review QCD 1 Other 6 8 Totals Note: The above data reflects peer review results as of December 11, 214. All 213 AICPA member reviews and non-member reviews have been presented and accepted by the RAB. ^At least one partner of the firm must be a member of the AICPA to enroll in the AICPA

7 Missouri Society of CPAs Page 7 Oversight Process Oversight Results reviews Non-AICPA Member Firms AICPA ^ Member Firms Type of (Sys, Eng) Must Select Engagement (ERISA, GAGAS, FDICA, NONE) Total Oversights Type of (Sys, Eng) Must Select Engagement (ERISA, GAGAS, FDICA, NONE) Total Oversights System GAGAS 1 System GAGAS 3 ERISA ERISA 2 NONE NONE 2 GAGAS only GAGAS only 1 ERISA only ERISA only Engagement Engagement 2 ^At least one partner of the firm must be a member of the AICPA to enroll in the AICPA Verification of reviewer s resumes Total Number of ers (non-nprc) Total Number of Resume s Verified for Year % of Total Verified Administrative oversights Date of Last Administrative Oversight Performed by the Administering Entity Date of Last On-site Oversight Performed by the AICPA Oversight Task Force (covers only the AICPA ) December 9, 213 November 3, 214