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Is peer review needed for related party F/S prepation?

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#1
Keyad22  
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Hi Accounting Pros,

If the CPA firm is only providing financial statements for related party, does the CPA firm still need peer review. Every engagement letter states clearly, "We are not independent with respect to XXX corporation". Does the CPA firms still need peer review? Or should the CPA firm withdraw from the AICPA peer review system?

Thank you,
Katherine
 

#2
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WA State
Check with your State Board of Accountancy

I would presume you still need some level of peer review if you are issuing an Accountant's Report. Most folks stop doing these engagements when the number falls below 10 or so because of these kinds of compliance costs.
~Captcook
 

#3
Keyad22  
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Location:
Bay Area, California
Thank you! I called and emailed to the state board of accountancy. The agent told she's going to forward my message to CPAs. I would like to check here while waiting.

If we provide preparation report, not compilation report, would it be okay without peer review? The problem is exactly the compliance cost. We only have one individual client with three companies needs financial reports. None of the company are C corp. All the other business were either sold or winding down.
 

#4
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Hilton Head Island, SC
You're in California, land of difficulty. I know in my state, if I am understanding you correctly, it would not be subject to peer review by SCLLR or AICPA. If all you do is prepared financials, they do not become subject to peer review unless required by state. Generally, states follow AICPA guidelines on that, where if you perform just one compilation, then the prepared financials are rolled into the peer review requirements. That is why I stopped offering compilations--first, they're useless, and two, it is just too much of a hassle with peer review when all I do otherwise is prepared financials.

BTW, issuing the accountant's disclaimer report under SSARS 21 AR-C 70 does not open you up to peer review. I know some argue that it should NOT be called a "report" since it is not a review or audit, but I follow the language as found in SSARS 21 AR-C 70, and it includes "see accountant's disclaimer report."
 

#5
Keyad22  
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572
Joined:
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Location:
Bay Area, California
We are undergoing peer review now. As long as it is compilation, it is subject to peer review. No matter the services were provided to non related or related party.

The preparation is not subject to peer review but our client needs the service to be in a higher level. Client prefers to compilation rather than preparation.

Thank you for your help.
 


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