- posted by Meyer Levy in the Mission Matters Blog
If your nonprofit organization has gone out to bid for their accounting or tax work it is important to keep in mind that accounting firms always need to adhere to the law and act in the public’s best interest. Accounting firms that have documentation of a tri-annual peer review can be a valuable tool for you when making a decision on a new firm. Peer reviews ensure that the accounting firm you will potentially be hiring is honest, professional, trustworthy, and most importantly carrying out audit engagements in accordance with authoritative auditing and accounting standards.
What is evaluated in a peer review?
A peer review details a firm’s accounting procedures and auditing services. There is great value to be had in choosing a firm that has completed a peer review and that has been certified by the American Institute of Certified Public Accountants (AICPA). The AICPA completes a full review of the accounting firm’s engagements including:
- Each function of the firm- The peer review must contain detailed descriptions of each person within the organization and their job functions. A reliable peer review contains explanations of each person’s credentials, and for those firms conducting Yellow Book audits, whether he/she meets the requirements under the Generally Accepted Government Audit Standards (GAGAS).
- The CPA firm conducting the actual peer review will select audit workpapers for certain clients of the organization to ensure that audits are carried out in accordance with authoritative auditing and accounting standards
- Paper files and reports- A firm is evaluated for its quality control policies in a peer review, so it is important that firms have all the necessary paperwork and records of all activity within the organization.
- Requirements- Firms working on certain not-for-profit engagements must have Continuing Professional Education (CPE) following GAGAS requirements. The firm must be clear of any disciplinary action by professional organizations, and must have a clean history of sanctions against the firm or any individual (current or older than three years).
Peer reviews provide written documentation of a firms honest business practices. It is also a critical component of validation and confirmation of truthful business operations and business exchanges that your nonprofit should be reviewing when evaluating potential accounting firms. If you have questions about what you should be looking for in a new accounting firm for your NPO? Please contact any member of our Not-For-Profit Team.