252 CMR, § 2.15

Current through Register 1533, October 25, 2024

Section 2.15 - Quality Review Requirement

(1)Definitions.

AICPA means the American Institute of Certified Public Accountants.

Attest means providing the following financial statement services:

(a) any audit or other engagement to be performed in accordance with the Statements on Auditing Standards (SAS);

(b) any review or compilation of a financial statement to be performed in accordance with the Statements on Standards for Accounting and Review Services (SSARS);

(c) any examination of prospective financial information to be performed in accordance with the Statements on Standards for Attestation Engagements (SSAE); and

(d) any engagement to be performed in accordance with the standards of the PCAOB; and

(e) any examination, review, or agreed upon procedures engagement to be performed in accordance with the SSAE, other than an examination described in 252 CMR 2.15(3).

Board, Licensee, Practice of Public Accountancy, and Quality Review are defined as set forth in M.G.L. c. 112, § 87A.

Compilation means providing a service to be performed in accordance with Statements on Standards for Accounting and Review Services (SSARS), that is presenting in the form of financial statements on information that is the representation of management (owners) without undertaking to express any assurance on the statements.

Engagement Review. A quality review where the quality reviewer evaluates and reports on whether engagements submitted for review are performed and reported on in conformity with applicable professional standards in all material respects.

Multi-jurisdictional Practice Unit means a practice unit with some members or employees who hold licenses issued by the Board and with other members or employees who have similar authority to practice public accountancy in one or more other jurisdictions.

PCAOB means Public Company Accounting Oversight Board that conducts firm inspections of public accounting firms that perform audits for publicly-held companies.

Practice Unit means:

(a) Each individual licensed by the Board who is engaged in the practice of public accountancy as a sole proprietor; or

(b) Each firm licensed by the Board to engage in the practice of public accountancy.

Quality Review Programs includes the Sponsoring Organization's entire quality review process, including but not limited to the standards for administering, performing and reporting on quality reviews, oversight procedures, training, and related guidance materials.

Quality Reviewer means a certified public accountant responsible for conducting the quality review holding a valid and active license to practice accounting in good standing by this state or some other state who meets the reviewer requirements of the quality review program. Qualifications of approved reviewers are stated in 252 CMR 2.15(3).

Report Acceptance Body is the Sponsoring Organization's committee responsible for, but not limited to, the acceptance of quality review documents.

Review Oversight Board means a committee of individuals licensed and appointed by the Board to provide oversight of the administration of approved quality review programs in order to provide reasonable assurance that quality reviews are being conducted and reported on in accordance with the minimum standards for performing and reporting on quality reviews.

Sponsoring Organization means a Board-approved professional society, or other organization responsible for the facilitation and administration of quality reviews though use of its quality review program and quality review standards

System Review. A quality review intended to provide the quality reviewer with a reasonable basis for expressing an opinion on whether, during the year under review:

(a) the reviewed firm's system of quality control for its accounting and auditing practice has been designed in accordance with quality control standards; and

(b) the reviewed firm's quality control policies and procedures were being complied with to provide the firm with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects.

(2)Quality Review Certification and Compliance of Requirements.

(a) Every licensee, as a condition for the renewal of a license to practice public accountancy, must certify under the pains and penalties of perjury either:

1. That the practice unit or, for individuals, the practice unit by which the individual is employed or is a member, partner or shareholder, has, within the three years immediately preceding the application for renewal, completed a quality review which has been accepted by a report acceptance body (or, for multi-jurisdictional practice units, a quality review which meets the requirements of 252 CMR 2.15(8)) and any actions mandated by the report acceptance body; or

2. That the practice unit, or for individuals, the practice unit by which the individual is employed or is a member, partner or shareholder, has conducted no attest or compilation engagements during the three years preceding the application for license renewal; and that the practice unit or individuals who are members, partners or shareholders of a practice unit will inform the Review Oversight Board if the practice unit undertakes an audit, review or compilation engagement and the practice unit, or, for individuals, the practice unit in which the individual is a member, partner or shareholder will undergo a quality review within 18 months of undertaking any such engagement.

(b) If a practice unit by which an individual licensee is employed or is a member, partner or shareholder has conducted an attest or compilation engagement during the three years preceding the application for license renewal, the licensee must further certify under the pains and penalties of perjury that the quality review was completed.

(c) Everypractice unit must cooperate with the approved reviewer, sponsoring organization, and the Review Oversight Board and take all steps necessary, including the payment of all costs and fees relating to the quality review, to comply with the quality review requirement.

(d) A practice unit and the members, partners or shareholders of a practice unit, that, after the date of renewal of a license, fails to continue to comply with the terms of the quality review program, must promptly inform the Board of any non-compliance by the practice unit. Such non-compliance failure to report same promptly to the Board, failure to cooperate with the approved reviewer, the sponsoring organization or the Review Oversight Board, or any other failure to comply with the quality review requirements of 252 CMR 2.15, shall be grounds for license revocation, suspension or other disciplinary action under M.G.L. c. 112, § 87C1/2 of any practice unit and any member, partner or shareholder thereof failing to comply or failing to report such non-compliance to the Board.

(e) In the event a firm's practice is sold, dissolved or merged with the practice of one or more other Firms, determination of successor or predecessor Firms, Quality Review year-end(s) and other Quality Review due dates, if any, will be made in accordance with the Board-approved Sponsoring Origination's guidance

(3)Approved Quality Review Sponsoring Organizations, Programs and Quality Review Standards.

(a) The Board shall approve quality review Sponsoring Organizations, program(s) and standards and may establish a review oversight board to make recommendations to the Board for its approval of such organizations, programs, and quality review standards.

(b) The Board adopts the American Institute of Certified Public Accountants (AICPA) as an approved Sponsoring Organization and its peer review program and other peer review programs administered by entities fully involved in the administration of the AICPA Peer Review Program and are not required to submit an application for approval to the Board. The Board may approve other quality review Sponsoring Organizations and programs.

(c) Any Board approved quality review program and any quality reviewer performing a quality review under 252 CMR 2.15(3) shall utilize standards for performing and reporting on quality reviews by a recognized national accountancy organization whose standards are generally accepted by other regulatory authorities in the United States and are acceptable to the Board, including, but not limited to, the AICPA Standards for Performing and Reporting on Peer Reviews.

(d) The Board may terminate its approval of a Sponsoring Organization for cause following notice and opportunity for hearing. For purposes of 252 CMR 2.15(3)(d), "cause" includes but is not limited to failure to maintain an ongoing compliance with the requirements of 252 CMR 2.00.

(e) For a quality review program organization, not specifically identified in regulations as Board-approved, to receive Board approval for its quality review program and standards, the quality review program organization must submit evidence to the satisfaction of the Board that the overall program and standards are at least equivalent to those of the AICPA Peer Review Program. At a minimum, the evidence shall include the standards, procedures, guidelines, oversight process, training materials and related documents used by those administering reviews, performing reviews, having reviews, and those considering reviews for acceptance. The Board has the authority to request any other documents/information from a quality review program organization that it determines is appropriate in deciding whether to grant approval.

(f) For Firms required to be registered with and inspected by the Public Company Accounting Oversight Board (PCAOB), the Board approves the PCAOB's inspection process for reviewing practices subject to its authority (which are not included in the scope of quality review programs). Firms receiving inspections under the PCAOB are also required to meet the quality review requirements under a Board-approved quality review program that covers the portion of the firm's practice not subject to the PCAOB inspection process, should it have such a practice.

(4)Conduct of Quality Reviews.

(a) Any Board approved quality review program and any quality reviewer performing a quality review under 250 CMR 2.15(4) shall utilize standards for performing and reporting on quality reviews by a recognized national accountancy organization whose standards are generally accepted by other regulatory authorities in the United States and are acceptable to the Board, including but not limited to the AICPA Standards for Performing and Reporting on Peer Reviews.

(b) For a sponsoring organization to receive Board approval for its quality review program and standards, the sponsoring organization must submit evidence to the satisfaction of the Board that the overall program and standards are at least equivalent to those of the AICPA Peer Review Program. At a minimum, the evidence shall include the standards, procedures, guidelines, oversight process, training materials and related documents used by those administering reviews, performing reviews, having reviews, and those considering reviews for acceptance. The Board has the authority to request any other documents/information from a quality review program organization that it determines is appropriate in deciding whether to grant approval.

(5)Authority and Function of Review Oversight Board.

(a) The Board may appoint up to five individual licensees to a Review Oversight Board to monitor programs administered by the report acceptance bodies and report periodically to the Board. Review Oversight Board members shall not be current members of the Board or perform any enforcement related work for regulatory or governmental bodies, professional organizations (including but not limited to an AICPA ethics committee, AICPA Joint Trial Board or state professional ethics committee) or similar groups or subgroups, including consultants and other similar arrangements for the board; and may be removed or replaced by the Board in its discretion.

(b) Each committee member shall annually sign a confidentiality statement indicating they will not divulge any information to the Board that would identify any firm, licensee, or quality reviewer/reviewing firm.

(c) The Review Oversight Board shall conduct oversight of approved quality review programs to provide reasonable assurance that such programs are in compliance with the minimum standards for performing and reporting on quality reviews. The committee shall report to the Board any modifications to approved quality review programs and shall make recommendations regarding the continued approval of quality review programs.

Oversight procedures to be performed by the Review Oversight Board may consist of, but are not limited to, the following activities:

1. Visiting the Sponsoring Organization of the approved quality review program;

2. Reviewing the Sponsoring Organization's procedures for administering the program;

3. Meeting with the Sponsoring Organization's RAB during consideration of quality review documents;

4. Reviewing the Sponsoring Organization's compliance with their programs and oversight quality control compliance.

(d) The Review Oversight Board shall verify that firms are in compliance through review of the quality review report, the firm's response to the matters discussed in the quality review report, and the acceptance letter outlining any additional corrective or monitoring procedures, and the letter(s) signed by the Sponsoring Organization notifying the firm that required actions have been appropriately completed.

(6)Confidentiality of Quality Review Reports.

(a) All quality review reports and related materials shall remain confidential, as provided in M.G.L. c. 112, § 87E1/2.

(b) Notwithstanding the provisions of 252 CMR 2.15(6) and M.G.L. c. 112, § 87E1/2, the Board shall have the right to inquire of a report acceptance body or the Review Oversight Board as to whether a quality review report has been accepted.

(7)Waiver of Quality Review.

(a) The Review Oversight Board may grant a waiver of or extension of time to meet the quality review requirement for the following reasons:

1. health;

2. military service; or

3. other good cause, as determined by the Review Oversight Board.

(b) Requests for waivers or extension of time shall be in writing, under oath, and submitted with the renewal form or as soon as practicable after the circumstances arise which are the basis for the request.

(c) Any practice unit which has been granted a waiver or extension of time shall immediately notify the Review Oversight Board when the basis upon which such waiver or extension of time was granted has ceased to exist. When the circumstances upon which such a waiver was granted cease to exist, the Review Oversight Board may require the practice unit to undergo a quality review at such time as the Review Oversight Board deems appropriate. A waiver shall only be effective for the calendar year for which it has been granted.

(d) A practice unit may request the Board to review a decision of the Review Oversight Board regarding a waiver or extension. Such request must be filed with the Board in a timely manner.

(10)Review of Multi-jurisdictional Practice Units. The Review Oversight Board may accept a quality review of a multi-jurisdictional practice unit which is based solely upon work conducted outside of Massachusetts as satisfying the quality review requirement if:

(a) the quality review was conducted within three years of the renewal application;

(b) the quality review is performed in accordance with requirements equivalent to those of the Board;

(c) the quality review studies, evaluates and reports on the financial reporting practice of the practice unit as a whole; and

(d) At the conclusion of the quality review, the quality reviewer issues a report meeting the requirements of 252 CMR 2.15(4).

252 CMR, § 2.15

Amended by Mass Register Issue 1339, eff. 5/19/2017.