SMALL AUDIT ORGANIZATIONS HAVE NOTHING TO FEAR FROM PEER REVIEW. Having recently completed a successful peer review, I know it can be done. I have the distinction of being the first one-person audit organization to undergo a ALGA peer review. I would like to describe what I took away from the process, how the process worked for a small audit organization, and how others might ready themselves.
First of all, the peer review process is not a new one to me. As a CPA, I have worked for large and small CPA practices that conducted annual assessments as well as had external peer reviews performed every three years. I found the ALGA peer review process was much like those peer reviews in that it emphasized the sharing of ideas and approaches in a professional manner.
Though my background was not originally with governmental standards, I have made the conversion over to governmental auditing fairly easily. Even though many believe there are vast differences between IIA (red book), GAO (yellow book), and AICPA standards; these varying audit standards have much in common and further the professionalism of auditing. All of these standards require a periodic peer review.
The key to preparation is planning
I won’t say that a peer review can be accomplished without any forethought or planning. On the contrary, the more you have planned, the better your outcome will be. Since I was hired to implement a new internal audit program, in a county that had no previous experience with an internal auditor, it was important that I start the program out correctly. I did a number of things when I first started:
- Talked with other government auditors in my state,
- Researched and chose what auditing standards I was going to comply with,
- Obtained copies of policies and procedures from other auditorganizations,
- Identified the internal audit program’s place in the organization,
- Educated local governmental officials about what was needed to make an effective internal audit program, and
- Established an audit committee and internal audit ordinance.
Select professional standards
Having always followed professional standards during my career, I understood the professionalism resulting from their use. Because of those audit standards, the level of work is elevated and ultimately the value of the reports provided by audit professionals is raised. After consideration and input from other auditors, I chose to follow government auditing standards (yellow book).
Develop a policies and procedures manual
After the choice of standards is made, it is a relatively easy task to develop a corresponding policies and procedures manual. I found governmental audit organizations are willing to share their policies and procedures manuals. What requires ongoing work is:
- Adjusting them for your operations,
- Making them part of your operation, and
- Educating others about why you follow standards.
Internal Audit Ordinance
The support for the internal audit program by the highest government officials is evidenced in the internal audit ordinance. I drafted my internal audit ordinance from the template provided by ALGA It took some changes and a couple of years to get it adopted by our governing body. I believe this document is critical to establishing independence, access to records, and the professionalism of the program.
Peer review process and suggestions
The peer review process has several distinct steps - planning, establishing the review period, scheduling the peer review, reviewing the agreement, coordinating travel arrangements, completing the background and Quality Control System (QCS) description forms, supporting the peer review team visit, responding to and promoting the peer review. I will mention a couple of the areas I worked on to make sure I was ready for the review.
- Peer review planning – After contacting the ALGA peer review coordinator, I was asked a number of questions to assess my readiness for the peer review. It was suggested that I complete the description of the quality control system for a preliminary review. Completing the description questionnaire makes sure your polices and procedures manual sufficiently addresses standards. The review coordinator, after reviewing the description of quality control system, had some suggestions but overall thought I was probably ready.
- Peer review budget – I budgeted a little over $2000 for the peer review, and the actual costs for two peer reviewers for four days came in a little under that. Using ALGA’s peer review process kept costs down. The peer review coordinator was mindful of the costs and worked with me to find peer reviewers in the region to keep airfare and travel costs down. I chose to add a fourth day, and the additional lodging and meals, to have the peer review team present the report and recommendations to the audit committee and Board of County Commissioners.
- Peer review agreement – I thought this part would be easy since ALGA has provided draft language, but as a self-insured county, our legal counsel required additional language and changes. After some discussion with the peer review coordinator, county counsel, county management, and the peer review team, I was able to come to some middle ground on the agreement. That took a couple weeks longer than I had anticipated, so you want to start this process early on.
- Providing peer review support – Within a one-person organization, the peer reviewers can only ask questions of one person. I had scheduled myself to be available to the peer reviewers during the course of the peer review. They didn’t take too much of my time but I made myself and all records easily accessible. I worked on projects that wouldn’t take me out of the office while they were conducting their review.
- Supervision standards – The peer review team did not focus on the direct supervision standard since this is a one-person organization. However, they focused on the aspects of the policies and procedures that mitigated the absence of supervision to maintain the quality of audit reports issued. I routinely use the ALGA peer review engagement checklist on each audit. In addition, clients are asked to review audit reports and audit reports are referenced to the workpapers.
- Peer review report – The report was well balanced and emphasized areas of excellence and areas for improvement.
- Highlights – One area the peer reviewers liked was seeing the use of findings development sheets that include finding, condition, criteria, effect, cause, and recommendation.
- Areas for improvement – These may vary by the organization, but the peer reviewers saw an additional need for more thorough cross-referencing since there is no supervision. Also recommended was the need to have audit reports more available to the public. It was suggested that audit reports be available from the county’s internet site.
- Final presentation – I choose to have the peer review team make a presentation to my audit committee and Board of County Commissioners. The peer review team used a ALGA PowerPoint presentation to provide an overview of the process as well as the key report comments. This was a great opportunity to further educate my audit committee and commissioners on the importance of complying with professional auditing standards. The presentation brought closure to the process and allowed questions to be asked of the independent peer review team. I believe the perception was that a thorough and professional assessment was made, and that added credibility to the internal audit program.
Final thoughts
In order to make a successful internal audit organization, you need to set the foundation of appropriate standards and practices. It is important for small audit organizations performing work in accordance with professional standards to take the steps to pass a peer review. It answers the question, “Who audits the auditors?”
Establish a goal for your audit organization to complete a peer review. The benefits of obtaining a peer review are many and in the process you will better understand the steps required to improve your processes. Having a peer review is one of the ways a small organization validates their procedures, gets feedback on other ways of doing things, and educates others in your organization about why auditing standards are important. Peer reviewers are a great source of information and can provide guidance to help step-up the professionalism of your audit organization.
Thanks to those that helped me reach this point – especially Drummond Kahn, Deborah Taylor, the N.A.L.G. A. Peer Review Committee, Mike Edmonds, John Finamore, and David Dean.
SMALL AUDIT ORGANIZATIONS HAVE NOTHING TO FEAR FROM PEER REVIEW. Having recently completed a successful peer review, I know it can be done. I have the distinction of being the first one-person audit organization to undergo a ALGA peer review. I would like to describe what I took away from the process, how the process worked for a small audit organization, and how others might ready themselves.
First of all, the peer review process is not a new one to me. As a CPA, I have worked for large and small CPA practices that conducted annual assessments as well as had external peer reviews performed every three years. I found the ALGA peer review process was much like those peer reviews in that it emphasized the sharing of ideas and approaches in a professional manner.
Though my background was not originally with governmental standards, I have made the conversion over to governmental auditing fairly easily. Even though many believe there are vast differences between IIA (red book), GAO (yellow book), and AICPA standards; these varying audit standards have much in common and further the professionalism of auditing. All of these standards require a periodic peer review.
The key to preparation is planning
I won’t say that a peer review can be accomplished without any forethought or planning. On the contrary, the more you have planned, the better your outcome will be. Since I was hired to implement a new internal audit program, in a county that had no previous experience with an internal auditor, it was important that I start the program out correctly. I did a number of things when I first started:
- Talked with other government auditors in my state,
- Researched and chose what auditing standards I was going to comply with,
- Obtained copies of policies and procedures from other auditorganizations,
- Identified the internal audit program’s place in the organization,
- Educated local governmental officials about what was needed to make an effective internal audit program, and
- Established an audit committee and internal audit ordinance.
Select professional standards
Having always followed professional standards during my career, I understood the professionalism resulting from their use. Because of those audit standards, the level of work is elevated and ultimately the value of the reports provided by audit professionals is raised. After consideration and input from other auditors, I chose to follow government auditing standards (yellow book).
Develop a policies and procedures manual
After the choice of standards is made, it is a relatively easy task to develop a corresponding policies and procedures manual. I found governmental audit organizations are willing to share their policies and procedures manuals. What requires ongoing work is:
- Adjusting them for your operations,
- Making them part of your operation, and
- Educating others about why you follow standards.
Internal Audit Ordinance
The support for the internal audit program by the highest government officials is evidenced in the internal audit ordinance. I drafted my internal audit ordinance from the template provided by ALGA It took some changes and a couple of years to get it adopted by our governing body. I believe this document is critical to establishing independence, access to records, and the professionalism of the program.
Peer review process and suggestions
The peer review process has several distinct steps - planning, establishing the review period, scheduling the peer review, reviewing the agreement, coordinating travel arrangements, completing the background and Quality Control System (QCS) description forms, supporting the peer review team visit, responding to and promoting the peer review. I will mention a couple of the areas I worked on to make sure I was ready for the review.
- Peer review planning – After contacting the ALGA peer review coordinator, I was asked a number of questions to assess my readiness for the peer review. It was suggested that I complete the description of the quality control system for a preliminary review. Completing the description questionnaire makes sure your polices and procedures manual sufficiently addresses standards. The review coordinator, after reviewing the description of quality control system, had some suggestions but overall thought I was probably ready.
- Peer review budget – I budgeted a little over $2000 for the peer review, and the actual costs for two peer reviewers for four days came in a little under that. Using ALGA’s peer review process kept costs down. The peer review coordinator was mindful of the costs and worked with me to find peer reviewers in the region to keep airfare and travel costs down. I chose to add a fourth day, and the additional lodging and meals, to have the peer review team present the report and recommendations to the audit committee and Board of County Commissioners.
- Peer review agreement – I thought this part would be easy since ALGA has provided draft language, but as a self-insured county, our legal counsel required additional language and changes. After some discussion with the peer review coordinator, county counsel, county management, and the peer review team, I was able to come to some middle ground on the agreement. That took a couple weeks longer than I had anticipated, so you want to start this process early on.
- Providing peer review support – Within a one-person organization, the peer reviewers can only ask questions of one person. I had scheduled myself to be available to the peer reviewers during the course of the peer review. They didn’t take too much of my time but I made myself and all records easily accessible. I worked on projects that wouldn’t take me out of the office while they were conducting their review.
- Supervision standards – The peer review team did not focus on the direct supervision standard since this is a one-person organization. However, they focused on the aspects of the policies and procedures that mitigated the absence of supervision to maintain the quality of audit reports issued. I routinely use the ALGA peer review engagement checklist on each audit. In addition, clients are asked to review audit reports and audit reports are referenced to the workpapers.
- Peer review report – The report was well balanced and emphasized areas of excellence and areas for improvement.
- Highlights – One area the peer reviewers liked was seeing the use of findings development sheets that include finding, condition, criteria, effect, cause, and recommendation.
- Areas for improvement – These may vary by the organization, but the peer reviewers saw an additional need for more thorough cross-referencing since there is no supervision. Also recommended was the need to have audit reports more available to the public. It was suggested that audit reports be available from the county’s internet site.
- Final presentation – I choose to have the peer review team make a presentation to my audit committee and Board of County Commissioners. The peer review team used a ALGA PowerPoint presentation to provide an overview of the process as well as the key report comments. This was a great opportunity to further educate my audit committee and commissioners on the importance of complying with professional auditing standards. The presentation brought closure to the process and allowed questions to be asked of the independent peer review team. I believe the perception was that a thorough and professional assessment was made, and that added credibility to the internal audit program.
Final thoughts
In order to make a successful internal audit organization, you need to set the foundation of appropriate standards and practices. It is important for small audit organizations performing work in accordance with professional standards to take the steps to pass a peer review. It answers the question, “Who audits the auditors?”
Establish a goal for your audit organization to complete a peer review. The benefits of obtaining a peer review are many and in the process you will better understand the steps required to improve your processes. Having a peer review is one of the ways a small organization validates their procedures, gets feedback on other ways of doing things, and educates others in your organization about why auditing standards are important. Peer reviewers are a great source of information and can provide guidance to help step-up the professionalism of your audit organization.
Thanks to those that helped me reach this point – especially Drummond Kahn, Deborah Taylor, the N.A.L.G. A. Peer Review Committee, Mike Edmonds, John Finamore, and David Dean.
SMALL AUDIT ORGANIZATIONS HAVE NOTHING TO FEAR FROM PEER REVIEW. Having recently completed a successful peer review, I know it can be done. I have the distinction of being the first one-person audit organization to undergo a ALGA peer review. I would like to describe what I took away from the process, how the process worked for a small audit organization, and how others might ready themselves.
First of all, the peer review process is not a new one to me. As a CPA, I have worked for large and small CPA practices that conducted annual assessments as well as had external peer reviews performed every three years. I found the ALGA peer review process was much like those peer reviews in that it emphasized the sharing of ideas and approaches in a professional manner.
Though my background was not originally with governmental standards, I have made the conversion over to governmental auditing fairly easily. Even though many believe there are vast differences between IIA (red book), GAO (yellow book), and AICPA standards; these varying audit standards have much in common and further the professionalism of auditing. All of these standards require a periodic peer review.
The key to preparation is planning
I won’t say that a peer review can be accomplished without any forethought or planning. On the contrary, the more you have planned, the better your outcome will be. Since I was hired to implement a new internal audit program, in a county that had no previous experience with an internal auditor, it was important that I start the program out correctly. I did a number of things when I first started:
- Talked with other government auditors in my state,
- Researched and chose what auditing standards I was going to comply with,
- Obtained copies of policies and procedures from other auditorganizations,
- Identified the internal audit program’s place in the organization,
- Educated local governmental officials about what was needed to make an effective internal audit program, and
- Established an audit committee and internal audit ordinance.
Select professional standards
Having always followed professional standards during my career, I understood the professionalism resulting from their use. Because of those audit standards, the level of work is elevated and ultimately the value of the reports provided by audit professionals is raised. After consideration and input from other auditors, I chose to follow government auditing standards (yellow book).
Develop a policies and procedures manual
After the choice of standards is made, it is a relatively easy task to develop a corresponding policies and procedures manual. I found governmental audit organizations are willing to share their policies and procedures manuals. What requires ongoing work is:
- Adjusting them for your operations,
- Making them part of your operation, and
- Educating others about why you follow standards.
Internal Audit Ordinance
The support for the internal audit program by the highest government officials is evidenced in the internal audit ordinance. I drafted my internal audit ordinance from the template provided by ALGA It took some changes and a couple of years to get it adopted by our governing body. I believe this document is critical to establishing independence, access to records, and the professionalism of the program.
Peer review process and suggestions
The peer review process has several distinct steps - planning, establishing the review period, scheduling the peer review, reviewing the agreement, coordinating travel arrangements, completing the background and Quality Control System (QCS) description forms, supporting the peer review team visit, responding to and promoting the peer review. I will mention a couple of the areas I worked on to make sure I was ready for the review.
- Peer review planning – After contacting the ALGA peer review coordinator, I was asked a number of questions to assess my readiness for the peer review. It was suggested that I complete the description of the quality control system for a preliminary review. Completing the description questionnaire makes sure your polices and procedures manual sufficiently addresses standards. The review coordinator, after reviewing the description of quality control system, had some suggestions but overall thought I was probably ready.
- Peer review budget – I budgeted a little over $2000 for the peer review, and the actual costs for two peer reviewers for four days came in a little under that. Using ALGA’s peer review process kept costs down. The peer review coordinator was mindful of the costs and worked with me to find peer reviewers in the region to keep airfare and travel costs down. I chose to add a fourth day, and the additional lodging and meals, to have the peer review team present the report and recommendations to the audit committee and Board of County Commissioners.
- Peer review agreement – I thought this part would be easy since ALGA has provided draft language, but as a self-insured county, our legal counsel required additional language and changes. After some discussion with the peer review coordinator, county counsel, county management, and the peer review team, I was able to come to some middle ground on the agreement. That took a couple weeks longer than I had anticipated, so you want to start this process early on.
- Providing peer review support – Within a one-person organization, the peer reviewers can only ask questions of one person. I had scheduled myself to be available to the peer reviewers during the course of the peer review. They didn’t take too much of my time but I made myself and all records easily accessible. I worked on projects that wouldn’t take me out of the office while they were conducting their review.
- Supervision standards – The peer review team did not focus on the direct supervision standard since this is a one-person organization. However, they focused on the aspects of the policies and procedures that mitigated the absence of supervision to maintain the quality of audit reports issued. I routinely use the ALGA peer review engagement checklist on each audit. In addition, clients are asked to review audit reports and audit reports are referenced to the workpapers.
- Peer review report – The report was well balanced and emphasized areas of excellence and areas for improvement.
- Highlights – One area the peer reviewers liked was seeing the use of findings development sheets that include finding, condition, criteria, effect, cause, and recommendation.
- Areas for improvement – These may vary by the organization, but the peer reviewers saw an additional need for more thorough cross-referencing since there is no supervision. Also recommended was the need to have audit reports more available to the public. It was suggested that audit reports be available from the county’s internet site.
- Final presentation – I choose to have the peer review team make a presentation to my audit committee and Board of County Commissioners. The peer review team used a ALGA PowerPoint presentation to provide an overview of the process as well as the key report comments. This was a great opportunity to further educate my audit committee and commissioners on the importance of complying with professional auditing standards. The presentation brought closure to the process and allowed questions to be asked of the independent peer review team. I believe the perception was that a thorough and professional assessment was made, and that added credibility to the internal audit program.
Final thoughts
In order to make a successful internal audit organization, you need to set the foundation of appropriate standards and practices. It is important for small audit organizations performing work in accordance with professional standards to take the steps to pass a peer review. It answers the question, “Who audits the auditors?”
Establish a goal for your audit organization to complete a peer review. The benefits of obtaining a peer review are many and in the process you will better understand the steps required to improve your processes. Having a peer review is one of the ways a small organization validates their procedures, gets feedback on other ways of doing things, and educates others in your organization about why auditing standards are important. Peer reviewers are a great source of information and can provide guidance to help step-up the professionalism of your audit organization.
Thanks to those that helped me reach this point – especially Drummond Kahn, Deborah Taylor, the N.A.L.G. A. Peer Review Committee, Mike Edmonds, John Finamore, and David Dean.
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Peer Review