|
October 31,
2002
To The Shareholders
Selden Fox, Ltd.
and the SEC Practice Section Peer Review Committee
We have reviewed the system of quality control for the accounting and
auditing practice of Selden Fox, Ltd. (the firm) in effect for the year
ended June 30, 2002. A system of quality control encompasses the firm’s
organizational structure and the policies adopted and procedures
established to provide it with reasonable assurance of complying with
professional standards. The elements of quality control are described
in the Statements on Quality Control Standards issued by the American
Institute of Certified Public Accountants (the AICPA). The design of
the system, and compliance with it, are the responsibilities of the
firm. In addition, the firm has agreed to comply with the membership
requirements of the SEC Practice Section of the AICPA Division for CPA
Firms (the Section). Our responsibility is to express an opinion on the
design of the system, and the firm’s compliance with that system and the
Section’s membership requirements based on our review.
Our review was conducted in accordance with standards established by the
Peer Review Committee of the Section and included procedures to plan and
perform the review that are summarized in the attached description of
the peer review process. Our review would not necessarily disclose all
weaknesses in the system of quality control or all instances of lack of
compliance with it or with the membership requirements of the Section
since it was based on selective tests. Because there are inherent
limitations in the effectiveness of any system of quality control,
departures from the system may occur and not be detected. Also,
projection of any evaluation of a system of quality control to future
periods is subject to the risk that the system of quality control may
become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, the system of quality control for the accounting and
auditing practice of Selden Fox, Ltd. in effect for the year ended June
30, 2002, has been designed to meet the requirements of the quality
control standards for an accounting and auditing practice established by
the AICPA, and was complied with during the year then ended to provide
the firm with reasonable assurance of complying with professional
standards. Also in our opinion, the firm complied during that year with
the membership requirements of the Section in all material respects.
Attachment to the Peer Review Report of Selden Fox, Ltd.
Description of the Peer Review Process
Overview
Member firms of the AICPA SEC Practice Section (the Section) must have
their system of quality control periodically reviewed by independent
peers. These reviews are system and compliance oriented with the
objective of evaluating whether:
The reviewed firm’s system of quality control for its accounting and
auditing practice has been designed to meet the requirements of the
Quality Control Standards established by the AICPA.
The reviewed firm’s quality control policies and procedures were being
complied with to provide the firm with reasonable assurance of complying
with professional standards.
The reviewed firm was complying with the membership requirements of the
SECPS in all material respects.
The Section’s Peer Review Committee (PRC) establishes and maintains
review standards. At regular meetings and through report evaluation
task forces, the PRC considers each peer review, evaluates the
reviewer’s competence and performance, and examines every report, letter
of comments, and accompanying response from the reviewed firm that
states its corrective action plan before the peer review is finalized.
The Transition Oversight Staff (formerly the staff of the Public
Oversight Board), and independent oversight body, plays a key role in
overseeing the performance of peer reviews working closely with the peer
review teams and the PRC.
Once the PRC accepts the peer review reports, letters of comments, and
reviewed firms’ responses, they are maintained in a file available to
the public. In some situations, the public file also includes a signed
undertaking by the firm agreeing to specific follow-up action requested
by the PRC. That file also includes the firm’s annual report which
contains information regarding the number of firm offices, firm
professionals, and SEC clients for which the firm is principal auditor-of-record.
Planning the Review
To plan the review of Selden Fox, Ltd., we obtained an understanding of
(1) the nature and extent of the firm’s accounting and auditing
practice, and (2) the design of the firm’s system of quality control
sufficient to assess the inherent and control risks implicit in its
practice. Inherent risks were assessed by obtaining an understanding of
the firm’s practice, such as the industries of its clients and other
factors of complexity in serving those clients, and the organization of
the firm’s personnel into practice units. Control risks were assessed
by obtaining an understanding of the design of the firm’s system of
quality control, including its audit methodology, and monitoring
procedures. Assessing control risk is the process of evaluating the
effectiveness of the reviewed firm’s quality control system in
preventing the performance of engagement that do not comply with
professional standards.
Performing the Review
Based on our assessment of the combined level of inherent and control
risks, we identified practice units and selected engagements within
those units to test for compliance with the firm’s quality control
system. The engagements selected for review included audits performed
under the Government Auditing Standards, and audits of Employee Benefit
Plans. The engagements selected for review represented a cross-section
of the firm’s accounting and auditing practice with emphasis on
higher-risk engagements. The engagement reviews included examining
working paper files and reports and interviewing engagement personnel.
The scope of the peer review also included examining selected
administrative and personnel files to determine compliance with the
firm’s policies and procedures for the elements of quality control
pertaining to independence, integrity, and objectivity; personnel
management; and acceptance and continuance of clients and engagements.
In addition, we tested compliance with the membership requirements of
the Section, including those pertaining to independence quality controls
and concurring partner review.
Prior to concluding the review, we reassessed the adequacy of scope and
conducted an exit conference with firm management to discuss our
findings and recommendations.
|
