Peer Reviews: Avoiding Independence Problems

By Charles Hall | Accounting and Auditing

May 17

Peer reviewers continue to hammer independence and related documentation. So it is vitally important that we not only be independent but that we also properly document its presence. My prior independence post pointed out that peer review checklists require reviewers to examine your independence documentation. This short video provides tips regarding independence and staying out of the dog house.

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About the Author

Charles Hall is a practicing CPA and Certified Fraud Examiner. For the last thirty years, he has primarily audited governments, nonprofits, and small businesses. He is the author of The Little Book of Local Government Fraud Prevention and Preparation of Financial Statements & Compilation Engagements. He frequently speaks at continuing education events. Charles is the quality control partner for McNair, McLemore, Middlebrooks & Co. where he provides daily audit and accounting assistance to over 65 CPAs. In addition, he consults with other CPA firms, assisting them with auditing and accounting issues.

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(2) comments

Jim Bennett May 24, 2017

Hi Charles – often for my clients, the review the financial statements that we prepare is a team effort. For example the Executive Director and the Controller will review them together, and together, I feel they have the SKE.

But the standards says “person” with SKE – how literal is “person”?

I checked with the AICPA technical hotline, and they seemed to indicate that “person” could really be one or more persons.

To me, this is just common sense – does the client have an adequate review process, whether that takes one person or 10 people. As long as they are bring the right skills to it, that’s fine with me.

So, don’t get hung up on “person”. Of course that means your independence documentation should identify the people that collectively have the SKE.

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Charles Hall May 24, 2017

Jim, yes, SKE normally is found in a particular person, but it can be more than one. I agree that your documentation would then need to address the persons with the SKE and what they do. Thanks.

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