As many of you are aware, the ALGA Peer Review Committee has been working on preparing a peer review guide for compliance with the IIA Standards commonly known as the "Red Book." One of the cornerstones of ALGA's commitment to improving the quality of auditing in local government is the peer review program. ALGA has always encouraged and supported a peer review program geared to measuring compliance with the GAO's Government Auditing Standards and the ALGA "Yellow Book" Peer Review Program has consistently received high ratings from participating audit agencies.

The Peer Review Committee has now completed the Peer Review Guide for Assessing Compliance with IIA International Standards for the Professional Practice of Internal Auditing commonly known as the "Red Book."

ALGA encourages local government auditors to adopt and follow either Government Auditing Standards (GAS) issued by the Comptroller General of the United States or International Standards for the Professional Practice of Internal Auditing (IIA Standards) issued by the Institute of Internal Auditors. ALGA's peer review program is intended to help member organizations to meet either or both sets of standards.

Peer review is a benefit of ALGA membership. The Peer Review Committee has developed two separate peer review guides to assist member organizations in meeting the external quality control standard for either GAS or IIA Standards. It is our view that GAS and IIA Standards are compatible, but do not correlate one for one. Therefore, organizations that follow both sets of standards should use this guide along with the most current Peer Review Guide, which assesses compliance with GAS.

IIA Standards require audit organizations to have an external peer review at least once every five years. The ALGA "Red Book" Guide is intended to assist member organizations in complying with IIA Standards and is consistent with IIA Practice Advisory 1312-2, which describes requirements for self-assessment with verification. ALGA does not provide broader scoped peer reviews as described in IIA Practice Advisory 1312-1. We encourage members to use this guide to self-assess, prepare for, and participate in a peer review.

The external peer review should determine whether, during the period under review, the reviewed audit organization's internal quality control system was adequate and whether quality control polices and procedures were complied with to provide the audit organization with reasonable assurance of conforming to applicable professional standards. Like the "Yellow Book" Peer Review Guide, the new "Red Book" Guide contains forms designed to assist reviewers in assessing compliance with the International Standards for the Professional Practice of Internal Auditing. Audit organizations can also use the "Red Book" Guide as a tool to conduct a self-assessment. By completing the Audit Organization Description of its Quality Control System (QCS Description), an organization can identify weaknesses in its internal quality control system and develop improved procedures to help ensure compliance with standards. Audit organizations should conduct such an assessment and have controls in place before undergoing an external peer review.

As of this writing the ALGA "Red Book" Guide has not yet been posted to the ALGA website, but look for it soon. If you have questions regarding the ALGA Peer Review Program, the ALGA Peer Review Guide, or if you would like to schedule a peer review, please contact me directly or a Peer Review Committee member. Peer Review Committee member contact information can be obtained from the ALGA web site or Member Services.

AICPA Peer Review Changes

For those of you interested in keeping up with peer review related changes in other professional associations, the AICPA is in the process of re-engineering their long standing peer review program.

On April 16, 2007 the AICPA Peer Review Board issued an exposure draft containing several proposals for review and comment by the AICPA's membership and other interested parties regarding revisions to the AICPA Standards for Performing and Reporting on Peer Reviews (Standards) and Interpretations to the Standards. Interpretations are discussed and developed in open meetings by the Board and have not been exposed for public comment.

The AICPA Peer Review Board has indicated an interest in receiving written comments or suggestions on any aspect of the exposure draft. When responding, ALGA members responding to the ED should refer to specific paragraphs and include supporting reasons for each comment or suggestion.

The most significant conclusions to come from the work of the task forces charged with revising the Standards were (1) a recommendation to merge the two current peer review programs and (2) a recommendation to reengineer the reporting process to be more understandable and usable in light of the growing mandate that the results of peer reviews be made more widely available.

The Peer Review Board has issued this exposure draft to propose those recommendations and incorporate other revisions to the Standards and related Interpretations (AICPA Professional Standards, PR Section 100) that are expected to result in a more efficient and effective program.

The revisions recognize the importance peer review plays in the state board of accountancy licensure process. Approximately 40 state boards require peer review, as do other regulators such as the Government Accountability Office. The Peer Review Board believes that the proposed revisions will improve peer review execution and rigor. Also, a new reporting model designed to meet the needs of reviewed firms and other stakeholders will enhance peer review report clarity, comparability and readability.

Responses should be sent to Susan Rowley, Senior Technical Manager, AICPA Peer Review Program, AICPA, 220 Leigh Farm Road, Durham, NC 27707-8110 in time to be received by June 30, 2007. Electronic responses in Microsoft Word should be sent to This e-mail address is being protected from spam bots, you need JavaScript enabled to view it in time to be received by June 30, 2007.

A copy of this exposure draft and the current Standards (effective for peer reviews commencing on or after January 1, 2005) are also available on the AICPA Peer Review Web site at http://www.aicpa.org/members/div/practmon/index.htm.

GAO Updates

As a matter of general interest, not directly (but maybe indirectly if you so choose) related to peer review, David Walker, the Comptroller General of the United States and head of the U.S. Government Accountability Office (GAO), has accepted an invitation to participate in a series of town hall-style forums around the nation. The purpose of these forums is to "state the facts and speak the truth regarding the nation's current financial condition and long term fiscal outlook." The Comptroller General intends to focus his discussion on the federal government's current deficit and the challenges posed by long-term demographic and economic trends.

These events started in September 2005 and will continue at least through the 2008 Presidential elections. Many are hosted by colleges and universities. You may ask "What has this to do with peer review"? I'll tell you-please go...stand-up, speak directly and clearly into the microphone. Tell Mr. Walker who you are, who you represent and ask him to tell you why we still can't get CPE for peer review!

...and finally, just a reminder

Members of the Peer Review Committee have reengineered the Memphis pre-conference peer review workshop so that information presented will include recent revisions to Government Auditing Standards, discussions related to frequent issues that arise in a typical peer review, and guidance on avoiding common peer review pitfalls. If it's been awhile since you've taken the pre-conference peer review course, you may want to consider a refresher on recent developments and changes.

Members of the Peer Review Committee welcome your comments, questions and input. Please don't hesitate to contact any of us.