(a) The board shall retain the Peer Review Oversight Board (PROB) for the purpose of:
  (1) monitoring sponsoring organizations to provide reasonable assurance that peer reviews are being conducted and reported in accordance with the Standards promulgated by the AICPA Peer Review Board;
  (2) reviewing the policies and procedures of sponsoring organization applicants as to their conformity with the peer review standards; and
  (3) reporting to the board on the conclusions and recommendations reached as a result of performing the functions in paragraphs (1) and (2) of this subsection.
(b) Information concerning a specific firm or reviewer obtained by the PROB during oversight activities shall be confidential, and the firm's or reviewer's identity shall not be reported to the board. Reports submitted to the board will not contain information concerning specific firms or reviewers. Members of the PROB will be required to execute a confidentiality statement for the sponsoring organization which they oversee.
(c) The PROB shall consist of active licensed Texas CPAs in a number sufficient to meet the objectives of this section as determined by the board. No member of the PROB shall be a current member of the board or one of its committees, the TXCPA' s Peer Review or Professional Conduct Committee, or the AICPA Professional Ethics Executive Committees or Peer Review Board (including subcommittees). The members should have extensive experience in accounting and auditing and in the practice of public accountancy at the partner (or equivalent) level within the past five years. If a member is associated with a firm subject to peer review, the member's firm must have received a report with a rating of pass from its last peer review. Compensation of PROB members shall be set by the board.
(d) The PROB shall make an annual recommendation to the board as to the qualifications of an approved sponsoring organization to continue as an approved sponsoring organization on the basis of the results of the following procedures:
  (1) Where the sponsoring organization is the AICPA/NPRC, state CPA societies other than Texas that are fully involved in the administering AICPA Peer Review Program, PROB shall review the published oversight reports of those entities or successors, to determine that there is an acceptable level of oversight;
  (2) Where the sponsoring organization is other than those listed in paragraph (1) of this subsection, PROB shall perform the following functions:
    (A) At least one member of the PROB shall attend all meetings of each sponsoring organization's PRRC. Certain PRRC meetings may be conducted via telephone or video conference. In those instances, the PROB may join the conference call.
    (B) During such visits, the PROB shall:
      (i) meet with the organization's peer review committee during the committee's consideration of peer review documents;
      (ii) evaluate the organization's procedures for administering the peer review program;
      (iii) examine, on the basis of a random selection or other criteria adopted by PROB, a number of reviews performed by the organization to include, at a minimum, a review of the report on the peer review, the firm's response to the matters discussed, the sponsoring organization's FLOA outlining any additional corrective or monitoring procedures, and the required technical documentation maintained by the sponsoring organization on the selected reviews; and
      (iv) expand the examination of peer review documents if significant deficiencies, problems, or inconsistencies are encountered during the analysis of the materials.
(e) In the evaluation of policies and procedures of sponsoring organization applicants, the PROB shall:
  (1) examine the policies as drafted by the applicant to determine that they will provide reasonable assurance of conforming with the standards for peer reviews;
  (2) evaluate the procedures proposed by the applicant to determine that:
    (A) assigned reviewers are appropriately qualified to perform the review for the specific firm;
    (B) reviewers are provided with appropriate materials;
    (C) the applicant has provided for consulting with the reviewers on problems arising during the review and that specified occurrences requiring consultation are outlined;
    (D) the applicant has provided for the assessment of the results of the review; and
    (E) the applicant has provided for an independent report acceptance body that considers and accepts the reports of the review and requires corrective actions by firms with significant deficiencies;
  (3) make recommendations to the board as to approval of the applicant as a sponsoring organization.
(f) Annually the PROB shall provide the board's Peer Review Committee with a report on the continued reliance of sponsoring organizations' peer reviews. The PROB report shall provide reasonable assurance that peer reviews are being conducted and reported on consistently and in accordance with the Standards promulgated by the AICPA Peer Review Board. A summary of oversight visits shall be included with the annual report.

Source Note: The provisions of this §527.7 adopted to be effective October 16, 2002, 27 TexReg 9579; amended to be effective October 12, 2004, 29 TexReg 9540; amended to be effective April 15, 2009, 34 TexReg 2383; amended to be effective June 13, 2013, 38 TexReg 3609; amended to be effective August 4, 2016, 41 TexReg 5554; amended to be effective March 31, 2021, 46 TexReg 2020; amended to be effective June 8, 2022, 47 TexReg 3265; amended to be effective February 8, 2023, 48 TexReg 518