N.Y. Comp. Codes R. & Regs. tit. 8 § 70.10

Current through Register Vol. 46, No. 51, December 18, 2024

Section 70.10 - Mandatory peer review program

(a) Establishment of peer review program. Except as otherwise provided in this section, pursuant to section 7410 of the Education Law, effective January 1, 2012, the department establishes a mandatory peer review program, requiring all applicants seeking a firm registration or a renewal of such registration to participate in a peer review of the firm's attest services.

(b) Definitions. For purposes of this section:

(1) Peer review report means a formal report issued by a reviewer and accepted by a sponsoring organization in accordance with this section.

(2) Peer review means a review conducted under the mandatory peer review program prescribed in this section.

(3) Review team means an individual or individuals assisting the team captain or review captain in conducting a review under this section.

(4) Reviewer means the team captain, review captain, or a member of a review team, if any, approved by the sponsoring organization to conduct a review.

(5) Sponsoring organization means an entity approved by the department in accordance with subdivision (e) of this section to oversee and facilitate peer reviews directly or through its administering entities, as defined in paragraph (7) of this subdivision, in accordance with the provisions of this section.

(6) Team or review captain means a person approved by a sponsoring organization to supervise and conduct a peer review under this section and to be responsible for the work performed by the review team.

(7) Administering entity means an entity approved by the department in accordance with subdivision (e) of this section to administer the mandatory peer review program.

(c) Participation in mandatory peer review program.

(1) Pursuant to section 7410 of the Education Law, an applicant seeking a renewal of its firm registration that performs attest services, shall undergo, no more frequently than once every three years, except pursuant to a disciplinary action brought under section 7408 of the Education Law, a peer review of the firm's attest services in accordance with the provisions of this section.

(2) In addition, any firm that performs attest services for any of the following shall be required to undergo an external peer review:

(i) 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; or

(ii) Federal governmental entities pursuant to Federal Law, in conformity with Generally Accepted Government Auditing Standards issued by the Comptroller General of the United States; or

(iii) Engagements performed under the Public Company Accounting Oversight Board standards.

(3) Any firm registered with the department that is not required to participate in a peer review program under this section shall submit an annual written notification of the basis for such non-participation as part of the firm's submission of its annual report as required in Education Law section 7408(3)(e).

(4) Any firm that begins providing attest services as described in Education Law section 7401-a or otherwise becomes subject to mandatory participation in the peer review program shall:

(i) notify the department of its change in status within 30 days and provide the department with evidence of enrollment in an acceptable peer review program ; and

(ii) the firm shall have a peer review completed within 18 months of the date such services were first provided.

(d) Peer Review Oversight Committee . The department establishes a peer review oversight committee (PROC) to oversee the mandatory peer review program and to perform the functions described in paragraph (2) of this subdivision.

(1) Composition of peer review oversight committee. The PROC shall be comprised of six members appointed by the Board of Regents. Members of the PROC shall be appointed by the Board of Regents for five-year terms. A vacancy occurring during a term shall be filled by an appointment by the Board of Regents for the unexpired term. At least five members of the PROC must be licensed certified public accountants in New York State and hold current registrations with the department, and may not be members of the State board for public accountancy or one of its committees. PROC members may not be members of the administering entity Peer Review Committee. PROC members shall be compensated in accordance with Education Law section 6506(4).

(2) Responsibilities of the PROC. The PROC shall:

(i) receive and approve the peer review administration plans from entities applying to be sponsoring organizations in accordance with subdivision (e) of this section;

(ii) at least annually monitor sponsoring organizations to provide reasonable assurance that the sponsoring organization is providing an acceptable level of oversight over reviewers, review teams and firms participating in the peer review program administered by the sponsoring organization and to ensure that such reviews are conducted and reported on in accordance with the peer review standards set forth in subdivision (i) of this section;

(iii) inform the department of any issues and/or problems relating to the peer review program which may require the department's intervention;

(iv) annually report to the department as to whether each sponsoring organization meets the standards necessary to continue as an approved sponsoring organization;

(v) annually assess the effectiveness of the peer review program;

(vi) annually report to the department on any recommended modifications to the peer review program;

(vii) review each peer review report submitted by a firm, as part of its registration or renewal of its registration, to determine whether the firm is complying with applicable professional standards;

(a) if the results of PROC's review indicate that a firm is complying with applicable professional standards and has received a peer review report issued by a reviewer approved by the department without deficiencies, the PROC shall recommend to the department that it accept the firm's peer review report;

(b) if the results of the PROC's review reveal that a firm's peer review report from a reviewer approved by the department includes deficiencies, or indicates that the firm was not in compliance with applicable professional standards, and if the PROC finds that the report warrants disciplinary action, the PROC may refer the firm to the Office of Professional Discipline pursuant to Education Law section 6510; and

(viii) ensure that any documents received from a firm or reviewer, sponsoring organization or entity administering peer review outside the State of New York shall be confidential and not constitute a public record and shall not be subject to disclosure under articles 6 and 6-A of the Public Officers Law. However, when any such document is admitted into evidence in a hearing held by the department, it shall then be a public record subject to disclosure under articles 6 and 6-A of the Public Officers Law.

(e) Approval of sponsoring organizations and administering entities. To qualify as a sponsoring organization or administering entity, an entity shall submit a peer review administration plan to the department for review and approval by the PROC. The sponsoring organization's or administrative entities' plan of administration shall:

(1) establish committees, as needed, and provide assurances that there is sufficient professional staff for the operation of the peer review program . The administering entities are required to participate in the oversight program conducted by the sponsoring organization;

(2) provide assurances that the sponsoring organization and administering entity will notify firms and reviewers participating in the peer review program of the latest developments in peer review standards and the most common deficiencies in peer reviews ;

(3) establish procedures for resolving any disagreement between the firm and the reviewer which may arise out of the performance of a peer review;

(4) acknowledge that the sponsoring organization and administering entity are subject to evaluations by the department or the PROC to periodically assess the effectiveness of the peer review program under its charge;

(5) establish procedures to evaluate and document the performance of each reviewer, and to disqualify a reviewer who does not meet the standards for peer reviews ;

(6) establish procedures such that the sponsoring organization and administering entity will provide the PROC timely access to peer review reports;

(7) establish procedures to ensure that any documents received from a firm or reviewer shall be confidential and not constitute a public record and shall not be subject to disclosure under articles 6 and 6-A of the Public Officers Law. However, when any such document is admitted into evidence in a hearing held by the Department, it shall then be a public record subject to disclosure under articles 6 and 6-A of the Public Officers Law; and

(8) provide for annual reports to the PROC on the results of the administering entities' peer review program, which shall include information on completed reviews, including the most common deficiencies noted by reviewers and, with respect to the peer review program:

(i) the number of reviews conducted;

(ii) the number of firms found to be performing and reporting in compliance with applicable professional standards;

(iii) the number of firms found to have some deficiencies in complying with applicable professional standards; and

(iv) the number of firms found not to be in compliance with applicable professional standards.

(f) Approval of team and review captains and review teams.

(1) Each approved sponsoring organization shall develop and provide a list of reviewers to the department. The list may be made publicly available on a website specified by the sponsoring organization. The department will monitor the list of approved reviewers for the peer review program.

(2) Each approved sponsoring organization shall develop and implement procedures to assure that each review team member:

(i) is licensed or otherwise authorized to practice public accountancy in any state; and

(ii) possesses knowledge of professional standards applicable to the attest practice or other specialized areas of practice to be reviewed, including recent experience in, and knowledge about, the rules and regulations appropriate to the industries of the engagements the individual will be reviewing.

(3) Each approved sponsoring organization shall develop and implement procedures to assure that each team or review captain:

(i) is licensed or otherwise authorized to practice public accountancy in any state; and

(ii) meets the following competencies prior to commencing a peer review:

(a)

(1) each team captain performing a peer review of a firm's system of quality control over its attest services, shall within the last five years, have experience performing attest services on behalf of a firm as a sole proprietor, partner of a partnership or limited liability partnership, member of a limited liability company or shareholder of a professional service corporation;

(2) each review captain performing a peer review to evaluate that a firm's engagements were performed and reported in conformity with applicable professional standards, shall within the last five years, have experience performing attest services on behalf of a firm as a sole proprietor, partner of a partnership or limited liability partnership, member of a limited liability company or shareholder of a professional service corporation, manager or person with equivalent supervisory responsibilities;

(b) has completed an initial training acceptable to the department that is in accordance with the American Institute of Certified Public Accountants Standards for Performing and Reporting on Peer Reviews, or its equivalent as determined by the department. At a minimum, said training shall include:

(1) training relating to the performance of peer reviews if the team captain will be issuing a report expressing an opinion on the firm's system of quality control; or

(2) training relating to the performance of peer reviews if the review captain will be issuing a report that only evaluates engagements submitted for review without expressing an opinion on the firm's system of quality control;

(c) subsequent to the team or review captain's completion of an introductory reviewer training course pursuant to clause (b) of this subparagraph and within each successive triennial period as a team or review captain, the team or review captain shall complete training acceptable to the department relating to the performance of peer reviews; and

(d) possesses knowledge of professional standards applicable to the attest practice to be reviewed, including recent experience in, and knowledge about, the rules and regulations appropriate to the industries of the engagements the individual will be reviewing.

(g) Removal from roster of qualified reviewers. The department may, upon notice and with the opportunity to respond, remove a reviewer from the roster of approved reviewers for:

(1) failure to meet the requirements of subdivision (f) of this section; or

(2) being subject to any final disciplinary action taken against him or her by a licensing or disciplinary authority of any jurisdiction with respect to any professional license or having any charges of professional misconduct pending against him or her in any other jurisdiction.

(h) Effect of substandard reviews. Any firm that receives a peer review report indicating that the firm has failed to design a system of quality control over its attest services or comply with its system of quality control over its attest services, or that receives a peer review report indicating that the firm has failed to perform and report on engagements in conformity with applicable professional standards in all material respects, may be referred by the PROC for disciplinary action under Education Law section 6510.

(i) Standards for peer reviews.

(1) Any sponsoring organization that administers peer reviews under this section and/or any reviewer performing a peer review under this section shall utilize standards for performing and reporting on peer reviews promulgated by a recognized national accountancy organization whose standards are generally accepted by other regulatory authorities in the United States and are acceptable to the department, including but not limited to the American Institute of Certified Public Accountants Standards for Performing and Reporting on Peer Reviews.

(2) In addition to the standards described in paragraph (1) of this subdivision, for any firm undergoing a review of its system of quality control, the review team shall review the firm's continuing education records on a sample basis and consider whether the records demonstrate that the licensee in the firm who supervised attest services or signed or authorized someone to sign the accountant's report on the financial statements of a client on behalf of the firm has met the competency requirements set forth in professional standards for such services, and in section 29.10(a)(13) of this Title.

(j) Access to peer review information .

(1) Any firm required to participate in the mandatory peer review program pursuant to section 7410 of the Education Law shall submit the following documents and revisions, as applicable, to the department:

(i) a peer review report issued by a reviewer approved by the department;

(ii) the firm's response letter;

(iii) an acceptance letter from a sponsoring organization;

(iv) letter(s) signed by the firm accepting the documents with the understanding that the firm agrees to take any actions required by the reviewer;

(v) a letter from the sponsoring organization notifying the reviewed firm that required actions have been appropriately completed ;

(vi) a letter indicating that the firm has enrolled or reenrolled into the peer review program. Such enrollment or reenrollment letter shall state the date by which the peer review shall be completed; and

(vii) a letter indicating that the firm has received an extension to complete the peer review or remedial actions.

(2) Peer review documents required in subparagraphs (1)(i) through (iii) of this subdivision shall be made available to the department via a website address provided by the sponsoring organization within 30 days of the date on the acceptance letter from the sponsoring organization. The peer review document required in subparagraph (1)(iv) of this subdivision shall be made available to the department within 30 days of the date that the firm signs such letter. The document required in subparagraph (1)(v) of this subdivision shall be made available to the department within 30 days of the date of the letter from the sponsoring organization notifying the reviewed firm that the required actions have been appropriately completed. The peer review document required in subparagraph (1)(vi) of this subdivision shall be made available to the department within 30 days of the date on the acceptance letter into the peer review program. The peer review document required in subparagraph (1)(vii) of this subdivision shall be made available to the department within 30 days of the date of the extension letter from the sponsoring organization. If a sponsoring organization cannot provide access to the peer review documents required in subparagraphs (1)(i) to (vii) of this subdivision via a website, the firm shall provide copies of the peer review documents by e-mail, mail or facsimile within 10 days of receipt of the applicable document, except for the peer review document required in subparagraph (1)(iv) of this subdivision which shall be submitted within 10 days of the date the firm signs such letter.

(k) Retention of documents.

(1) Each reviewer and sponsoring organization, as applicable, shall maintain all documentation necessary to establish that each review conformed to the review standards of the relevant review program, including the review working papers, copies of the review report, and any correspondence indicating the firm's concurrence, non-concurrence, and any proposed remedial actions and any related implementation.

(2) The documents described in paragraph (1) of this subdivision shall be retained by the reviewer for a period of time corresponding to the retention period of the sponsoring organization, and shall be made available upon request of the PROC. In no event shall the retention period be less than 120 days from the date of acceptance of the review by the sponsoring organization.

(l) Public Company Accounting Oversight Board (PCAOB) inspections. In addition to the review required under subdivision (c) of this section, any firm that undergoes an inspection conducted by the PCAOB as required under the Sarbanes-Oxley Act of 2002 shall be subject to a review of its most recent inspection report by the PROC.

N.Y. Comp. Codes R. & Regs. Tit. 8 § 70.10

Amended New York State Register February 7, 2018/Volume XL, Issue 06, eff. 2/7/2018

Amended New York State Register March 28, 2018/Volume XL, Issue 13, eff. 3/28/2018

Amended New York State Register November 3, 2021/Volume XLIII, Issue 44, eff. 11/3/2021