Mandatory quality review program for public accountancy.
Purpose:
To establish the requirements for the mandatory quality review program for public accountancy.
Text or summary was published
in the July 28, 2010 issue of the Register, I.D. No. EDU-30-10-00003-P.
Final rule as compared with last published rule:
No changes.
Revised rule making(s) were previously published in the State Register on
October 6, 2010.
Text of rule and any required statements and analyses may be obtained from:
Christine Moore, New York State Education Department, 89 Washington Avenue, Albany, NY 12234, (518) 473-8296, email: cmoore@mail.nysed.gov
Assessment of Public Comment
Since publication of a Notice of Proposed Rule Making in the State Register on July 28, 2010, the State Education Department received the following comments.
COMMENT: Two commenters expressed concern that the proposed regulations require auditors performing audits for small not-for-profit entities to undergo a peer review in accordance with government auditing standards also known as the "Yellow Book" standards promulgated by the Comptroller General of the United States. The commenters believe that requiring the application of these peer review standards could raise the cost of an independent audit of small not-for-profit entities. Another commenter expressed concern that the regulation would require all NYS Charities Bureau clients to be audited according to the "Yellow Book" standard, and that the CPAs would be required to meet the "Yellow Book" Continuing Professional Education requirement.
RESPONSE: The proposed regulation implements the requirements of Chapter 651 of the Laws of 2008, which requires "a firm that performs attest services for any New York State or municipal department, board, bureau, division, commission, committee, public authority, public corporation, council, office, or other governmental entity performing a governmental or proprietary function for New York State or any one or more municipalities thereof, or performs attest services specifically required to be performed pursuant to New York State law… to undergo an external peer review in conformity with" Generally Accepted Government Auditing Standards issued by the Comptroller General of the United States. The proposed amendment does not impose any additional requirements above those imposed by statute.
COMMENT: One commenter expressed concerns over the ambiguity of the phrases "begins providing attest services" and "initial performance" of attest services.
REPSONSE: The AICPA standards define the date of performance as the date the accountant issues an attestation report. The same date will be used for purposes of the proposed amendment. The Department will clarify this in guidance.
COMMENT: One commenter expressed concerns over the use of the term "conducted" and suggested that the term "completed" be used to avoid ambiguity and conform to current professional standards. The regulation states that the peer review must be ‘conducted' within 18 months. The commenter would prefer the term ‘completed.'
RESPONSE: The Department has revised the proposed regulation to use the term completed instead of conducted to avoid any ambiguity and conform to the AICPA standards.
COMMENT: One commenter recommends that the Quality Review Oversight Committee recommend to the Department the acceptance of peer review reports rated "pass with deficiencies," similar to reports rated "pass without deficiencies."
RESPONSE: The Department believes that the Quality Review Oversight Committee should review all reports with deficiencies and reserve its ability and judgment to determine if such deficiencies warrant disciplinary action. The Department believes this to be in the public's best interest.
COMMENT: One commenter suggested a change to the reporting standard to coincide with existing peer review standards by including the wording "in all material respects" in the regulation. The commenter also suggested changing the section on referrals to the Office of Professional Discipline to include the wording "in all material respects," based on the fact that this language is used in reports on financial statements and in the proposed quality review standards.
RESPONSE: The proposed regulation provides for the adoption of AICPA standards for peer review. These standards require the review team to report whether or not a firm's is complying with applicable professional standards "in all material respects." Therefore it is not necessary to include the suggested level of specificity in the proposed regulation.
COMMENT: Professional standards require that a letter of comments be issued by the review team, if deficiencies were found during a quality review and if the quality review was commenced prior to January 1, 2009. To conform to these professional standards, the commenter suggested that the Department clarify that in addition to a quality review report, the letter of comments should also be submitted to the Department for those firms falling into this category.
RESPONSE: The Department believes that because the implementation date of the quality review requirement is January 1, 2012, many of the firms submitting reports under the regulation will have had their quality reviews commenced after January 1, 2009 and this requirement will not affect many of the firms submitting reports in compliance with the regulation. However to address this concern, the Department will clarify the need to submit a letter of comments in guidance for firms that fall into this category.
