Preparing for Peer Review? Common NFP Auditor’s Report Mistakes That Can Lead to Peer Review Findings

The AICPA’s 2026 Reviewer Alerts are putting renewed attention on the issues peer reviewers are seeing in practice and what those issues can reveal about a firm’s broader processes and templates. In its February Alert, Peer Review Staff specifically reminded reviewers to consider whether a problem is isolated to one engagement or tied to a firm-wide template or process. 

For CPA firms preparing for an upcoming peer review, that’s a good reason to take a fresh look at an area that can be easy to put on autopilot: the auditor’s report itself. 

If your firm audits not-for-profit organizations, chances are your engagement teams have used the AICPA’s illustrative auditor’s report from the Audit and Accounting Guide: Not-for-Profit Entities or another AICPA resource. 

At first glance, the illustration can look like a straightforward template: update the organization’s name, reporting period, location, and date, then finalize the report. 

However, those bracketed instructions throughout the illustration are there for a reason. 

They represent decisions your engagement team needs to make based on the circumstances of each audit. When those decisions are carried forward from last year, overlooked during review, or treated as simple formatting choices, they can create reporting deficiencies and potentially unwanted attention during your firm’s next peer review. 

The takeaway for CPA firms is simple: don’t just ask whether your auditor’s report matches the illustration. Ask whether your team can support why each reporting decision was made. 

And that starts with understanding what those bracketed instructions are really asking your engagement team to consider. 

The Illustration Is a Starting Point, Not a Finished Report 

The current auditor reporting model established under SAS No. 134 places the Opinion section first, followed by Basis for Opinion, management’s responsibilities, the auditor’s responsibilities, and other sections when applicable. 

The overall structure may be familiar. The important part is determining which provisions actually apply to the engagement in front of you. 

For example, your engagement team may need to consider: 

• Was the auditor engaged to communicate Key Audit Matters? 

• Does the organization issue an annual report containing information outside the audited financial statements that needs to be considered under AU-C 720? 

• Is the engagement subject to Government Auditing Standards, Single Audit requirements, or another legal or regulatory reporting requirement? 

• Is the firm separately reporting on internal control over financial reporting? 

• Does the report require modification based on the specific circumstances of the engagement? 

  
  

These aren't simply template choices. They are professional judgments that should align with the engagement scope, applicable professional standards, and your firm's documentation. 

During peer review, that distinction matters. 

Why CPA Firms Should Pay Attention Before Peer Review 

The auditor’s report is one of the most visible products of an audit engagement. It is also an area where inconsistencies can quickly raise questions about a firm's quality-control processes. 

A report containing an unnecessary section, missing required language, or retaining language from a prior-year engagement may appear minor in isolation.

But it can point to a larger question: 

Was the report intentionally tailored and appropriately reviewed, or was it simply rolled forward? 

That is the question firms should be asking themselves before a peer reviewer has the opportunity to ask it. 

The goal isn't to make every report look identical to an illustrative example. In fact, appropriate tailoring is often necessary. The goal is to demonstrate that your firm's reporting decisions were intentional, technically appropriate, documented, and subject to effective review. 

That protects more than your peer review results. It strengthens the consistency and quality of the audit work your firm delivers to its clients. 

What Your Peer Reviewer Is Really Looking For 

A peer reviewer isn't simply comparing your auditor's report word-for-word against an AICPA illustration. 

The more important question is whether the report complies with applicable professional standards and whether your firm's procedures support the decisions reflected in it. 

Consider a not-for-profit (NFP) that publishes an annual report containing its audited financial statements along with other narrative information. If the engagement team doesn't appropriately evaluate whether AU-C 720 applies, the issue isn't merely that a paragraph may be missing. 

It may raise questions about the firm's process for identifying other information, documenting the conclusion, and reviewing the final report. 

That's why seemingly small reporting issues can matter during peer review. The final report can provide clues about the processes behind it. 

For firms that want to be well prepared, the objective shouldn't be to "clean up" reports immediately before peer review. It should be to build a repeatable process that helps engagement teams get these decisions right throughout the year.  

Common NFP Auditor’s Report Issues CPA Firms Often Make 

• Leftover Template Instructions 

Bracketed instructions, editorial notes, prior-year dates, old entity names, and other template artifacts occasionally survive multiple levels of review. 

Beyond the obvious presentation issue, these mistakes may suggest that the firm's final report review process needs strengthening. 

Consider making template-artifact review a specific step in your firm's completion checklist rather than relying on a general instruction to "review the report." 

• Incorrect Subtitle Structure 

Depending on the circumstances, the illustrative report may include subtitles such as "Report on the Financial Statements" and "Report on Other Legal and Regulatory Requirements." 

Those headings aren't decorative. 

Teams should understand when the additional reporting section applies and ensure the report's structure follows the applicable professional standards rather than carrying forward headings from another engagement. 

• Key Audit Matters Included—or Excluded—Without Considering the Engagement 

Key Audit Matters (KAM) aren't automatically required for a typical nonissuer NFP audit. 

If KAM reporting is included, the engagement team should understand why it applies and ensure the reporting is consistent with the terms of the engagement and applicable standards. 

The key is intentionality: the report should reflect the engagement you actually performed, not simply the template you started with. 

• Other Information Isn't Properly Considered 

Other information can be an easy area to overlook because determining whether AU-C 720 applies requires the engagement team to understand what the organization plans to issue alongside its audited financial statements. 

Rather than waiting until the report is nearly final, firms can build this question into engagement planning and client communications. 

Ask early. Document the response. Revisit it before report release if circumstances change. 

• Internal Control Language Doesn't Match the Engagement 

Standard auditor's report language addresses the auditor's consideration of internal control in designing appropriate audit procedures without expressing an opinion on the effectiveness of internal control. 

If the firm has a separate responsibility to report on internal control, the report language needs to be evaluated accordingly. 

Leaving standard language untouched simply because it appeared in the starting template can result in inconsistencies within the firm's reporting package. 

Five Steps to Strengthen Your Firm Before Its Next Peer Review 

If your firm performs NFP audits, consider taking these steps before your next peer review cycle: 

1. Create a report-tailoring decision checklist. Don't rely exclusively on instructions embedded within your report template. Create a separate checklist addressing items such as Key Audit Matters, Other Information, additional legal or regulatory reporting, internal control reporting, and other engagement-specific considerations. 

2. Make Other Information an affirmative question. Build the determination into planning and client communications, so the engagement team knows whether the organization expects to issue an annual report or other information with the audited financial statements. 

3. Add a report-specific final review. Include explicit review steps for bracketed instructions, prior-year dates, entity names, report headings, optional sections, and other template artifacts. 

4. Keep reporting standards part of annual training. Even experienced auditors can fall into the habit of rolling forward familiar language. Periodic training on AU-C 700–720 can help teams understand the reasoning behind the report - not just where to find the latest template. 

5. Perform your own pre-peer-review spot check. Sample several recently issued NFP reports across different engagement teams. Look for consistency, but more importantly, determine whether your files demonstrate why key reporting decisions were made. 

If you discover different approaches across engagement teams, that's valuable information to have before your peer reviewer arrives. 

Peer Review Preparation Should Happen Before the Peer Review 

A successful peer review isn't built in the weeks leading up to the review. It's built through the processes your firm follows on every engagement. 

Report tailoring is one example of an area that can appear small but reveal much more about a firm's approach to engagement quality, documentation, supervision, and review. 

For CPA firm leaders, especially those managing growing audit practices, the goal isn't simply to avoid a finding. It's to build systems that make quality easier to achieve consistently. 

How BryMar Helps CPA Firms Prepare for Peer Review 

BryMar works with passionate leaders of CPA firms who care about audit quality and want greater confidence heading into peer review. 

Our team performs system and engagement peer reviews, bringing an independent and practical perspective to the process. We understand the technical requirements, but we also understand what it takes to operate an audit practice where deadlines, staffing demands, changing standards, and quality expectations all compete for attention. 

Our approach is designed to make peer review constructive - not simply another compliance exercise. 

Whether you're approaching your next peer review or looking to strengthen your firm's audit quality between review cycles, identifying issues early gives your team more opportunity to improve processes, reinforce training, and create consistency across engagements. 

Preparing for Your Firm’s Next Peer Review? 

Don't wait until your peer review is underway to discover that report-tailoring practices vary from one engagement team to another. 

If your CPA firm performs NFP audits, now is a good time to review your report templates, completion checklists, and documentation practices and determine whether they clearly support the reporting decisions your teams are making. 

If your next peer review is approaching, reach out to our team to start the conversation.