If your firm’s peer review is scheduled before December 15, 2026, you may be wondering what your peer reviewer will expect to see if your first annual evaluation of the system of quality management is not due until December 15, 2026.
The good news: the AICPA has specifically addressed this “split year” situation. See the Q&A here.
Your firm does not need to complete its first annual evaluation early simply because your peer review occurs before December 15, 2026.
However, your quality management system should already have been designed, implemented, and operating since December 15, 2025.
At the time of peer review, you should be prepared to show:
The firm was required to design, implement, and operate its system of quality management by December 15, 2025. Its first annual evaluation of that system, which takes place through the monitoring process, is due no later than December 15, 2026.
For firms still working through the risk assessment portion of their documentation, this is also a good point to revisit the firm’s quality objectives, identified quality risks, and responses. The AICPA specifically notes that this documentation should be available for the peer reviewer to evaluate.
While monitoring may still be underway, your quality management system should not be.
The fact that your first annual evaluation is not due until December 15, 2026 does not mean operating effectiveness is irrelevant until then. Policies and procedures that have been implemented should be operating, and your peer reviewer may evaluate that operation during the period under review.
For a broader discussion of the design and operating-effectiveness procedures peer reviewers may perform, see:
Depending on the firm’s circumstances and monitoring plan, that may be appropriate.
The AICPA acknowledges that a peer review may occur before all monitoring and remediation procedures have been performed. It specifically notes that documentation related to management’s final assessment and certain remediation procedures may not yet exist when the peer review is performed.
That does not mean the firm should simply tell the reviewer, “Monitoring is not due yet.”
Instead, the firm should be prepared to explain where it is in the process.
The goal is not to rush every planned monitoring procedure ahead of the peer review.
The goal is to have a monitoring plan that is organized, supportable, and consistent with how the firm actually intends to monitor its system.
A calendar alone is not enough. If a procedure was supposed to occur earlier in the year and simply did not happen, simply moving the procedure to a future date on the monitoring schedule does not, by itself, resolve the issue. However, if the monitoring plan reasonably provides for certain procedures to occur later in the year, the firm should be able to explain that timing and show how those procedures fit into the broader monitoring process.
No. A peer review and your firm’s monitoring procedures serve different purposes.
It may be tempting in a peer review year to think, “Our engagements are already being reviewed. Do we really need to perform our own engagement inspections too?”
The peer review does not replace the monitoring activities your firm has established as part of its system of quality management.
Your peer reviewer is evaluating the design, implementation, and operating effectiveness of the firm’s system. Your firm’s monitoring process, on the other hand, is how management evaluates whether the system itself is working as intended and identifies deficiencies that may require remediation.
If engagement inspections are part of your firm’s monitoring plan, being subject to peer review does not by itself eliminate the need to perform them.
For example, if the firm’s documented monitoring plan calls for engagement inspections later in the fall, a September peer review does not necessarily mean those inspections must suddenly be moved forward. The AICPA specifically acknowledges that some monitoring and remediation procedures may not yet have been performed when a peer review occurs before the December 15, 2026 annual evaluation.
The firm should instead be prepared to show:
Peer review is not your monitoring plan.
Your peer reviewer may review engagements as part of the peer review, but that does not relieve firm management of its responsibility to operate the firm’s own monitoring process.
This distinction is especially important in the first year of SQMS No. 1 because some firms may still be thinking about monitoring primarily through the lens of the legacy annual inspection process. Under the new standard, engagement inspections are one part of a broader monitoring process rather than the entirety of monitoring.
The following is an example of what that might look like in practice.
Assume a firm’s peer review begins in September 2026. Its monitoring plan provides for independence and consultation monitoring throughout the year, selected reviews of quality-management documentation during the year, and engagement inspections in October and November.
At the time of peer review, the firm should be able to provide:
That is different from a firm that has not yet determined how it will monitor the system or has simply postponed monitoring activity until the end of the year.
The AICPA specifically states that a peer reviewer may still evaluate the firm’s system before management has performed that annual evaluation.
If your peer review is approaching, I would focus on making sure the following are organized and available:
For firms with a split peer review year, the reviewer will also consider the portion of the year governed by the former QC standards and the portion governed by the QM standards. The AICPA has indicated that reviewers are not necessarily required to complete both sets of checklists, although additional procedures may be appropriate depending on the nature and extent of the changes to the firm’s system.
If you are using the CC Consulting Risk Matrix, much of the documentation related to the firm’s quality objectives, quality risks, responses, and related policies and procedures is already organized within the matrix.
At this stage, the focus should increasingly shift from what the firm designed to whether those responses were implemented and what evidence exists to demonstrate their operation.
If you are using the full SQMS No. 1 Toolkit, the monitoring materials can also help organize:
I have also developed a short guide for firms navigating a peer review before their first SQMS annual evaluation.
Request the guide and I’ll email you a copy at no charge.