In this subtitle the following words have the meanings indicated. “Engagement review” means a peer review that evaluates whether there is a reasonable basis for expressing limited assurance that: financial statements with which the individual or firm is associated conform in all material respects with professional standards; and reports and internal documentation of the work performed by the individual or firm conform with professional standards. “Fail” means, in connection with a report of a peer reviewer, one or more significant deficiencies in performing or reporting in conformity with professional standards in the individual or the firm being reviewed. “Peer review” means a study, appraisal, or review of one or more aspects of the professional work of an individual or firm performed by a person licensed as a certified public accountant. “Report indicating pass with deficiencies” means a report of a peer reviewer that indicates one or more deficiencies in performing or reporting in conformity with professional standards in the individual or firm being reviewed. “Review” means the analysis of a financial statement that: is performed in accordance with the Statements on Standards for Accounting and Review Services of the American Institute of Certified Public Accountants; and provides a licensee with a reasonable basis for expressing limited assurance that there are no material modifications that should be made to the statement in order for it to be in accordance with generally accepted accounting principles, or, if applicable, with any other comprehensive basis of accounting. “System review” means a peer review evaluating whether there is reasonable assurance that: the system of quality control of the individual or firm being reviewed is designed and operated in such a manner as to meet professional standards; financial statements with which the licensee or firm is associated conform in all material respects with professional standards; and reports and internal documentation of the work performed by the licensee or firm conform with professional standards.

A licensee or permit holder who performs any of the services described in § 2-4A-04 of this subtitle shall be required to undergo, at least once every 3 years, a peer review. The Board may modify the peer review requirement for a licensee or permit holder upon a showing of good cause. A peer review shall be performed and recorded in accordance with standards no less stringent than those set forth in the standards for performing and reporting on peer reviews of the American Institute of Certified Public Accountants. The Board must approve a peer review program other than the peer review program of the American Institute of Certified Public Accountants prior to its use to satisfy the requirements of this section. A licensee or permit holder shall affirm under the penalties of perjury on a standard form provided by the Board compliance with the peer review requirement at the time of license or permit renewal.

A licensee or permit holder who provides services requiring peer review on or after October 1, 2005, shall comply with the peer review requirement within 3 years after initiating those services. A licensee or permit holder who provides services requiring a peer review and who submits a renewal application after October 1, 2008, shall affirm under the penalties of perjury on a standard form provided by the Board completion of the licensee or permit holder’s most recent peer review. If the 3-year period in subsection (a) of this section has not expired prior to the date of the license or permit renewal, and the licensee or permit holder has had no peer review within the last 3 years, the licensee or permit holder must notify the Board in writing within 30 days of the date the peer review is completed.

A system review is required for a licensee or permit holder that performs any of the following services: engagements governed by the Statements on Auditing Standards of the American Institute of Certified Public Accountants; or engagements governed by the government auditing standards issued by the U.S. Government Accountability Office; examinations of prospective financial information under: the Statements on Standards for Attestation Engagements of the American Institute of Certified Public Accountants; or the government auditing standards issued by the U.S. Government Accountability Office; or audits of issuers not registered with the U.S. Securities and Exchange Commission that are performed under standards of the Public Company Accounting Oversight Board. An engagement review is required for a licensee or permit holder not required to have a system review that performs any of the following services: review of historical financial statements in accordance with the Statements on Standards for Accounting and Review Services of the American Institute of Certified Public Accountants; compilation of historical financial statements with disclosures performed under the Statements on Standards for Accounting and Review Services of the American Institute of Certified Public Accountants; compilation of historical financial statements that omit substantially all disclosures performed under the Statements on Standards for Accounting and Review Services of the American Institute of Certified Public Accountants; or engagements performed under the Statements on Standards for Attestation Engagements of the American Institute of Certified Public Accountants other than the examination of prospective financial statements.

Prior to conducting a peer review, an individual must be approved by the Board. In order to receive approval from the Board, a peer reviewer shall: have and maintain an active license as a certified public accountant in this or any other state; possess a level of knowledge of applicable professional standards acceptable to the Board; possess at least 5 years recent experience in the practice of public accounting; have received a passing report on the most recent peer review of the prospective peer reviewer; and complete an appropriate training course as determined by the Board. In order to serve as a team captain of a system review, a peer reviewer must have and maintain ownership or management of a firm or comparable responsibility. A peer reviewer shall have no connection to the licensee or permit holder being reviewed that might impair the peer reviewer’s independence. A peer reviewer shall: prepare a report of findings in accordance with the standards for performing and reporting on peer reviews of the American Institute of Certified Public Accountants; and maintain the report for a period of 3 years. A peer reviewer shall provide a copy of the report to the Board only if the licensee or permit holder being reviewed has: been directed to take corrective action and has failed to satisfy the peer reviewer that such action has been completed in a timely manner; received a second consecutive report indicating pass with deficiencies; or received a failing report. A peer reviewer shall comply with all Board regulations and directives regarding the peer review process. The Board may revoke its approval of a peer reviewer under this section if the peer reviewer: violates any provision of this title; violates any regulation adopted by the Board; or is sanctioned by any state board of accountancy or any unit of State or federal government.

Upon the receipt of a report from a peer reviewer, the Board shall review the report to determine what disciplinary or corrective action is appropriate. The Board may require a licensee or permit holder to: undergo peer review more frequently than once every 3 years; and complete additional continuing professional education courses. Prior to taking any final action under subsection (b) of this section, the Board shall give the licensee or permit holder against whom the action is contemplated an opportunity for a hearing before the Board. If the peer review report reveals evidence that the licensee or permit holder has engaged in conduct that is prohibited under § 2-315 or § 2-410 of this title, the Board may file formal charges against the licensee or permit holder.