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The purpose of a Letter of Response (LOR) is to describe the actions the reviewed firms have taken, or will take, to ensure deficiencies, such as the ones noted in the Report and Letter of Comments (LOC), do not recur in the future. LORs should be carefully prepared because of the importance they have on the Peer Review Committee's decisions on the acceptance of reports and any required corrective actions (if warranted). Some tips for writing an effective LOR include: The response should be addressed to the Peer Review Committee. A synopsis of each finding, in the same order as they appear in the Report (if applicable) and LOC, should appear, followed by the firm's response to the finding. If a modified or adverse report was received, the responses to each finding should be separated by subheadings that designate those that resulted in a modified (or adverse) report and those that did not result in a modified report. The response must describe the actions taken or planned by the reviewed firm with respect to each finding in the Report and LOC. The actions should focus on improvements to the firm's system of quality control policies and procedures, regardless of whether the peer review was a system or engagement review. The changes to the firm's system of quality control policies and procedures should focus on ensuring that generic categories of deficiencies, such as the ones noted, do not recur in the future. For instance, the response to a deficiency regarding a missing disclosure of the use of estimates should include a change in the firm's policies and procedures that will ensure no disclosure deficiencies recur in the future. In the event an engagement is determined to be substandard, the response to the related finding must include the firm's plan of action for correcting the deficiency on the engagement. The firm's plan of action could be recalling and reissuing the substandard financial statements or, if issuance of the next financial statements is imminent, prospectively correcting the deficiencies on the engagement. The LOR must not refer to any attachments, and the LOR must adequately explain the firm's response without attachments. In cases where improvements in the firm's quality control policies and procedures do not appear to be an issue, the firm might consider taking Continuing Professional Education courses (CPE) in areas related to the deficiencies. If the reviewed firm disagrees with one or more of the comments, the disagreement should be resolved between the firm and the team captain/reviewer prior to completion of the LOR. In the rare instances where disagreements over findings cannot be resolved, the firm's response should describe the reasons for such disagreement. Unless the firm would like to contest the finding in an appeal to the Peer Review Committee, the firm's response should not include extraneous information. For instance, the firm should not provide justification for the firm's actions that resulted in the deficiency. The LOR must be signed by the firm. LORs that are signed with a partner name are not acceptable. The reviewed firm should submit the LOR for review and comment to the team captain/reviewer for his or her comments prior to submitting the LOR to the Texas Society of CPA's Peer Review Department. Once the firm and team captain/reviewer agree upon the LOR, the firm should send the following documents to the Texas Society of CPA's Peer Review department within 30 days, or by the review due date if less than 30 days: 1. The Peer Review Report 2. The LOC 3. The LOR LORs that do not appear to be comprehensive, genuine and feasible will be rejected. Therefore reviewed firms can speed up the acceptance process (and avoid time-consuming revisions to the LOR) by providing a well written and well thought out LOR.
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