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Glossary/Quality and peer review

Peer review ratings

Peer review ratings are pass, pass with deficiency(ies) and fail. A pass means the firm's system was suitably designed and complied with. A fail means significant deficiencies show it was not.

CORAA TeamUpdated November 5, 2026

Definition

A peer review ends in a report with one of three ratings, in both system reviews and engagement reviews. A pass means the reviewer concluded the firm's system was suitably designed and complied with, giving reasonable assurance of conformity with professional standards in all material respects. Pass with deficiency(ies) means the system was suitably designed and complied with except for the described deficiencies. A fail means the reviewer concluded the system was not suitably designed or not complied with, based on significant deficiencies.

Why it matters in an audit or review

Ratings are reported to the administering entity, whose peer review committee can require corrective actions or an implementation plan for anything other than a pass. A firm with deficiencies provides a response describing what it will do, and may face follow-up reviews or required education. Noncompliance with peer review requirements can affect AICPA membership and licensing. Results are confidential by default: a firm may give copies of its latest accepted report on request, and some firms' documents are in the AICPA Public File.

Example

Illustrative: a firm receives a pass with deficiencies because two of the 12 engagements reviewed had no documentation of the fraud brainstorming discussion, and the firm's checklist did not require it. The firm's response commits to revise the checklist, train staff before the next busy season, and have a partner confirm the step on every audit file for the next year.

Common mistakes

Reading a pass with deficiencies as a technicality. It can bring corrective actions or an implementation plan, and state boards may have access to the results.

Sources

  • AICPA, Standards for Performing and Reporting on Peer Reviews
  • AICPA, Questions and Answers About the AICPA Peer Review Program (June 2025), types of reports; corrective actions; access to peer review results

Definitions paraphrase AICPA and FASB guidance; read the standard itself before relying on a requirement. Example figures are illustrative. This page is guidance, not professional advice. Report an error

Standards

AICPA Standards for Performing and Reporting on Peer Reviews

Related terms

  • Peer review
    Peer review is an independent evaluation of a CPA firm's accounting and auditing practice by another qualified CPA. Firms that audit generally need one every three years under the AICPA program.
  • Matters for further consideration
    Matters for further consideration (MFCs) are issues reviewers note during a peer review that need evaluation but are not yet findings. They are documented on a form that can be elevated.
  • AICPA Peer Review Program
    The AICPA Peer Review Program is the practice-monitoring program run by the AICPA and administered by state CPA societies and other entities. Firms that audit generally enroll and are reviewed every three years.
  • SQMS 1
    SQMS No. 1 is the AICPA standard requiring a CPA firm to design, implement and operate a risk-based system of quality management for its accounting and auditing practice. It replaced SQCS No. 8.

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