What Are the AICPA Peer Review Standards?

An AICPA peer review is a periodic, external assessment of a certified public accounting (CPA) firm’s practice. Its purpose is to ensure a firm’s work meets the professional standards set by the American Institute of Certified Public Accountants (AICPA) for high-quality performance. This process is part of the profession’s self-regulation, aiming to enhance public trust in financial reporting by having one CPA firm evaluate another’s work.

The AICPA administers this practice-monitoring program, which is required for its members in public practice and for licensure in most states. Firms undergo this review every three years to provide assurance that their quality management systems are effective and followed. The program is also educational, helping firms improve their processes and confirm they are issuing reports that comply with AICPA standards.

Determining Your Firm’s Peer Review Requirement

A firm must enroll in the AICPA Peer Review Program if it has at least one AICPA member and performs engagements under the Statements on Auditing Standards (SASs), Statements on Standards for Accounting and Review Services (SSARSs), or Statements on Standards for Attestation Engagements (SSAEs). These standards cover services ranging from financial statement audits to compilation and review engagements. The specific nature of a firm’s engagements, based on the level of assurance provided, dictates which of the two types of peer reviews it must undergo.

System Reviews

A System Review is the more comprehensive type of peer review. It is required for firms that perform engagements under SASs, such as financial statement audits, or certain examinations under the SSAEs. The objective is to provide an opinion on the design of the firm’s system of quality management and its compliance with that system.

The reviewer evaluates the firm’s quality management policies and procedures. This involves reviewing engagement files and assessing the overarching system that governs the firm’s practice to determine how the firm ensures quality across all its relevant engagements.

Engagement Reviews

Firms that do not perform services mandating a System Review may be eligible for an Engagement Review. This applies to firms whose highest level of service includes compilations or reviews under SSARSs, or certain attestation engagements under SSAEs that are not examinations. An Engagement Review is narrower in scope, focusing on the work product for a selection of engagements.

This review evaluates whether the financial statements and accountant’s reports conform with professional standards. The reviewer examines the final work product and associated documentation to provide feedback on the firm’s application of standards on an engagement-by-engagement basis.

Preparing for the Peer Review

Preparation begins with creating and maintaining a documented system of quality management. The AICPA’s Statements on Quality Management (SQMS) require firms to design and implement a system that provides reasonable assurance that the firm and its personnel comply with professional standards. This new suite of standards, led by SQMS 1, introduces a risk-based approach that integrates quality management directly into how firms conduct audits and reviews.

The quality management system must detail policies for governance, leadership, ethical requirements, and client acceptance. It must also outline procedures for engagement performance, including how engagement quality reviews are conducted as specified in SQMS 2, and the monitoring and remediation processes used to correct deficiencies. All firms are required to have their quality management systems designed and implemented by December 15, 2025.

Another step is selecting a qualified peer reviewer. The firm can choose its own reviewer, who must be approved by the administering entity, or request that the entity appoint one. The chosen reviewer must be independent and have expertise in the types of engagements the firm performs.

Firms must also gather necessary documentation for the reviewer, including:

• The finalized quality management system documentation
• A comprehensive list of all attest engagements from the one-year review period
• Financial statements and workpapers for selected engagements
• Documentation verifying personnel independence
• Records of continuing professional education (CPE)
• Evidence of current firm licensing

Finally, the firm must complete administrative forms, such as the “Information Required for Scheduling a Peer Review” form. This document captures details about the firm’s practice areas and personnel to help the reviewer plan the assessment. These forms are available through the state CPA society or the AICPA’s online portal.

The Peer Review Process

The peer review process is interactive, with specific procedures that depend on the type of review being conducted.

For a System Review, the reviewer conducts an in-depth look at the firm’s quality management system. The reviewer will interview firm personnel to understand how the system operates in practice. They will also test compliance by examining records of independence confirmations, inspecting CPE documentation, and reviewing a sample of engagement workpapers to verify the system was consistently applied.

The process for an Engagement Review is more narrowly focused. The reviewer’s primary task is to assess a sample of engagements by inspecting the financial statements, the accountant’s report, and the required documentation from the firm. Because it does not involve a study of the firm’s broader quality system, an Engagement Review is often performed off-site.

Throughout either review, there is ongoing dialogue between the reviewer and the firm. If the reviewer identifies potential issues of non-compliance with professional standards, these are discussed as they arise. This communication allows the firm to provide additional information or context that may resolve the issue before the review concludes.

The active phase of the review concludes with an exit conference. During this meeting, the reviewer presents a summary of the results to the firm’s management, including the draft report and any recommendations. This provides an opportunity for the firm to understand the basis for the reviewer’s conclusions and ask questions before the final report is issued.

Understanding Peer Review Reports and Required Actions

The peer review concludes with a final report that provides a rating summarizing the reviewer’s findings. This report is a formal record of the outcome and dictates any subsequent actions the firm must take.

There are three possible ratings a firm can receive. A “Pass” rating indicates the firm’s system of quality management is suitably designed and was complied with to provide reasonable assurance of conforming with professional standards. A “Pass with Deficiencies” rating is given when deficiencies are found but are not considered significant enough to warrant a fail. A “Fail” rating means the reviewer found significant deficiencies in the firm’s quality management system.

The final report contains the reviewer’s opinion letter stating the conclusion and rating. If the rating is “Pass with Deficiencies” or “Fail,” the report will also include a detailed list of the findings and the firm’s formal response. This structure ensures transparency about any identified issues and the firm’s plan to address them.

For any rating other than “Pass,” the firm must submit a formal letter of response to the administering entity, such as a state CPA society. This letter must outline the corrective actions the firm will take to remediate the deficiencies. The peer review committee of the administering entity evaluates the report and the firm’s response to determine if the proposed actions are sufficient to resolve the issues.