What is Peer Review?
The Government Auditing Standards manual, also known as the "Yellow Book," stipulates that each audit organization must obtain an external peer review every three years. and that this review should be conducted by reviewers independent of the audit organization.
The peer review should be sufficient in scope to provide a reasonable basis for determining whether (1) the reviewed audit organization’s system of quality control was suitably designed and (2) the organization is complying with its quality control system so that it has reasonable assurance that it is performing and reporting in conformity with professional standards and applicable legal and regulatory requirements in all material respects.
What do peer reviewers look for?
- Does the audit organization have a policy and procedures manual? Does the content of the manual align with the standards set out by the Yellow Book? Do members of the audit team have access to the manual?
- Is the audit team independent of the people and organizations it is auditing? Does the audit shop have a process in place to continually assess the independence of the auditor and the audit team?
- Is the audit team competent to perform audits? Have the auditors met their continuing education requirements?
- Does the audit shop have a system in place to ensure compliance with standards on each audit? Is this quality control system reviewed and adjusted annually?
- Does audit documentation comply with standards? Did the auditor address risk, controls, IT, fraud, and compliance, as required by standards? Did the auditor gather sufficient, appropriate evidence to back up their findings and conclusions?
- Do the audit reports comply with standards? Do the reports include the required language and content? Are all statements backed up with sufficient, appropriate evidence? Did the auditee get a chance to respond to the auditor's findings?
The preceding questions were adapted from The Audit Peer Review Checklist, found here.
For more information, please refer to the Guiding Principles of the Association of Local Government Auditors (ALGA), found here.