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How to Prepare Your Letter of Response

  1. Address the letter to the Peer Review Committee.
  2. Address each finding in the report/letter of comments.
  3. Describe the specific action the firm will take to remedy the deficiencies noted in the findings. In other words, how will the firm change its practices (formal or informal) to prevent recurrence of the matters noted in the findings? See the attached pages for examples of corrective actions.
  4. Indicate if necessary, who in your firm will be responsible for monitoring implementation of the changes.
  5. If the firm received a qualified or adverse report, the firm's responses should be separated between those findings that resulted from a qualified or adverse report and those that did not.
  6. If you disagree with a finding or recommendation, describe the reason for the disagreement.
  7. If you have questions about preparing your letter of response, your reviewer should be able to help. You may also call our technical reviewer, Al Clavelli (650) 802-2342.
  8. Mail your letter of response (within 30 days or the due date of your review, whichever is earlier) to:

Peer Review Program
California Society of CPAs
1235 Radio Road
Redwood City, CA 94065-1217
Fax: (650) 802-2350

Examples of Corrective Actions For Engagement and Report Reviews

The following examples illustrate some of the procedures that firms use to maintain the quality of their financial statement engagements. Other options may be available. The best solution is your own best judgement and the size and nature of your firm. This list does not imply that your firm should adopt all the procedures illustrated.

To Strengthen Financial Statement Review
  • Review or establish guidelines for the procedures to be performed when reviewing workpapers and financial statements.
  • Establish guidelines for documenting the review of an engagement.
  • Establish procedures for circumstances when a person must review their own work. A common solution is to set the workpapers aside for a few days and approach the engagement with the frame of mind of an independent reviewer.
  • Adopt a second person review procedure.
To Prevent Reporting Deficiencies
  • Adopt the use of a reporting checklist.
  • Periodically review the types of reporting commonly prepared by the firm.
  • Determine that the basis of accounting referenced in the report matches the basis used in preparing the financial statements.
  • Provide examples of various reports for use by firm members.
  • Establish guidelines for communicating reportable conditions.
  • Review standard reporting formats used within the firm and update as needed.
  • Attend an update course on financial statement reporting.
  • Review and update the language used on standard computer generated reports.
To Prevent Financial Statement Disclosure and Presentation Deficiencies
  • Adopt a policy specifying the circumstances when a financial disclosure checklist should be used.
  • Establish polices for assigning responsibility for the preparation of disclosure checklists.
  • Assign responsibility for maintaining current checklists.
  • Require that the financial statement disclosure checklist be reviewed as part of the engagement review.
  • Obtain a current copy of an applicable industry accounting and auditing guide.
  • Instruct staff, if any, on the proper way to complete a disclosure checklist, including resolution of questions involving unfamiliar issues
  • Attend an update course on financial statement presentation disclosure.
  • Review recent technical pronouncements.
  • Hold a staff meeting to review the disclosure checklist.
To Prevent General Deficiencies
  • Obtain additional library reference material.
  • Obtain additional training (formal or informal) in the areas where departures were noted.
  • Consult with the AICPA toll-free technical hotline, or the CalCPA Accounting and Auditing Answerline (if you are a CalCPA member).
  • Arrange for pre-issuance concurring review of difficult or complex engagements.
  • Perform internal monitoring.