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Monday, May 15, 2000

Hoffman Article Examines Accounting Peer Review Program

SALISBURY, MD---Dr. Richard C. Hoffman, associate professor of management in the Franklin P. Perdue School of Business at Salisbury State University, recently had the article, "Perceptions of Peer Review Program of the Accounting Profession: Implications for Management," accepted for publication in the Journal of Managerial Issues.

According to Hoffman, "The peer review program of the accounting profession was designed to improve the quality of accounting and audit practices while retaining self-regulation. As a result, the program was intended to give greater confidence to managers in hiring accounting firms for accounting and auditing services. Due to the increased Securities and Exchange Commission's concern about audit quality, this study assesses the effectiveness of the American Institute of CPA's peer review program sponsored by its SEC Practice Section.

"The study tests three hypotheses," wrote Hoffman, "the goals and effectiveness of the peer review program using data from four primary constituents groups---CPA firms, audit clients, bankers and financial analysts. The findings reveal that each of the four constituent groups ranked ‘improving audit practices' as the primary goal of the peer review program. In addition, when the level of the constituents' familiarity with the peer review program was controlled, there were no significant differences in the extent to which the groups perceive the achievement of this goal. The constituents disagreed on the adequacy of the peer review program characteristics relating to quality standards, fraud detection, use of sanctions and investor knowledge.

"However the constituents did agree that peer review reduces audit failure and that both clients and the public do not fully understand the peer review process."


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